Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. But they are at the whim of volatile macroeconomic factors that sway capital spending, like interest rates. Wariness surrounding these influences has caused the industry to underperform the market as it was flat over the past six months while the S&P 500 climbed by 4.1%.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. Taking that into account, here is one resilient industrials stock at the top of our wish list and two we’re passing on.
Two IndustrialsStocks to Sell:
Hudson Technologies (HDSN)
Market Cap: $357.4 million
Founded in 1991, Hudson Technologies (NASDAQ:HDSN) specializes in refrigerant services and solutions, providing refrigerant sales, reclamation, and recycling.
Why Does HDSN Fall Short?
- Annual sales declines of 15.5% for the past two years show its products and services struggled to connect with the market during this cycle
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Hudson Technologies’s stock price of $8.22 implies a valuation ratio of 10.7x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including HDSN in your portfolio.
MRC Global (MRC)
Market Cap: $1.21 billion
Producing bomb casings and tracks for vehicles during WWII, MRC (NYSE:MRC) offers pipes, valves, and fitting products for various industries.
Why Are We Out on MRC?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 2.9% annually over the last five years
- Earnings per share have contracted by 33.4% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- ROIC of 0.9% reflects management’s challenges in identifying attractive investment opportunities
At $14.05 per share, MRC Global trades at 11.9x forward P/E. Dive into our free research report to see why there are better opportunities than MRC.
One Industrials Stock to Watch:
Wabtec (WAB)
Market Cap: $36.26 billion
Also known as Wabtec, Westinghouse Air Brake Technologies (NYSE:WAB) provides equipment, systems, and related software for the railway industry.
Why Does WAB Stand Out?
- Core business is healthy and doesn’t need acquisitions to boost sales as its organic revenue growth averaged 9.5% over the past two years
- Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Share repurchases over the last two years enabled its annual earnings per share growth of 25.5% to outpace its revenue gains
Wabtec is trading at $211.91 per share, or 24.3x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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