Even if they go mostly unnoticed, industrial businesses are the backbone of our country. Unfortunately, this role also comes with a demand profile tethered to the ebbs and flows of the broader economy, and the industry is currently lagging as its six-month return of 4.5% has trailed the S&P 500’s 9% gain.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. Keeping that in mind, here is one industrials stock boasting a durable advantage and two best left ignored.
Two Industrials Stocks to Sell:
Griffon (GFF)
Market Cap: $3.56 billion
Initially in the defense industry, Griffon (NYSE:GFF) is a now diversified company specializing in home improvement, professional equipment, and building products.
Why Are We Cautious About GFF?
- Annual sales declines of 5.2% for the past two years show its products and services struggled to connect with the market during this cycle
- Projected sales growth of 1.4% for the next 12 months suggests sluggish demand
Griffon’s stock price of $75 implies a valuation ratio of 13.1x forward price-to-earnings. Check out our free in-depth research report to learn more about why GFF doesn’t pass our bar.
Orion (ORN)
Market Cap: $300.3 million
Established in 1994, Orion (NYSE:ORN) provides construction services for marine infrastructure and industrial projects.
Why Do We Steer Clear of ORN?
- 4.6% annual revenue growth over the last two years was slower than its industrials peers
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 19.1% annually while its revenue grew
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Orion is trading at $8.10 per share, or 24x forward price-to-earnings. Read our free research report to see why you should think twice about including ORN in your portfolio.
One Industrials Stock to Buy:
Core & Main (CNM)
Market Cap: $9.97 billion
Formerly a division of industrial distributor HD Supply, Core & Main (NYSE:CNM) is a provider of water, wastewater, and fire protection products and services.
Why Is CNM a Good Business?
- Impressive 16.2% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
- Share repurchases over the last two years enabled its annual earnings per share growth of 21.1% to outpace its revenue gains
At $52.01 per share, Core & Main trades at 22.8x forward price-to-earnings. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run - and we’re laser-focused on finding the best stocks for this upcoming cycle.
Put yourself in the driver’s seat by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.
