Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. But their prominence also brings high exposure to the ups and downs of economic cycles. Luckily, the tide is turning in their favor as the industry’s 18.1% return over the past six months has topped the S&P 500 by 3.7 percentage points.
Regardless of these results, investors should tread carefully. The diversity of companies in this space means that not all are created equal or well-positioned for the inescapable downturn. With that said, here is one resilient industrials stock at the top of our wish list and two we’re passing on.
Two Industrials Stocks to Sell:
Helios (HLIO)
Market Cap: $1.88 billion
Founded on the principle of treating others as one wants to be treated, Helios (NYSE: HLIO) designs, manufactures, and sells motion and electronic control components for various sectors.
Why Should You Dump HLIO?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Incremental sales over the last five years were less profitable as its earnings per share were flat while its revenue grew
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Helios is trading at $56.81 per share, or 20.2x forward P/E. Dive into our free research report to see why there are better opportunities than HLIO.
Scorpio Tankers (STNG)
Market Cap: $2.45 billion
Operating one of the youngest fleets in the industry, Scorpio Tankers (NYSE: STNG) is an international provider of marine transportation services, specializing in the shipment of refined petroleum.
Why Is STNG Not Exciting?
- Demand for its offerings was relatively low as its number of total vessels has underwhelmed
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 6.8%
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
Scorpio Tankers’s stock price of $51.99 implies a valuation ratio of 9x forward P/E. Read our free research report to see why you should think twice about including STNG in your portfolio.
One Industrials Stock to Buy:
Fluence Energy (FLNC)
Market Cap: $2.92 billion
Pioneering the use of lithium-ion batteries for grid storage, Fluence (NASDAQ: FLNC) helps store renewable energy sources with battery systems.
Why Are We Bullish on FLNC?
- Demand is greater than supply as the company’s 21.5% average backlog growth over the past two years shows it’s securing new contracts and accumulating more orders than it can fulfill
- Additional sales over the last two years increased its profitability as the 27.4% annual growth in its earnings per share outpaced its revenue
- Negative free cash flow margin has improved over the last five years, showing the company is one step closer to financial self-sufficiency
At $22.11 per share, Fluence Energy trades at 92.8x forward EV-to-EBITDA. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
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