Even if they go mostly unnoticed, industrial businesses are the backbone of our country. Still, their generally high capital requirements expose them to the ups and downs of economic cycles, and the market seems to be baking in a prolonged downturn as the industry has shed 7.6% over the past six months. This drawdown was worse than the S&P 500’s 1.8% fall.
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 are two industrials stocks boasting durable advantages and one best left ignored.
One Industrials Stock to Sell:
Mercury Systems (MRCY)
Market Cap: $2.77 billion
Founded in 1981, Mercury Systems (NASDAQ: MRCY) specializes in providing processing subsystems and components for primarily defense applications.
Why Do We Steer Clear of MRCY?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Issuance of new shares over the last five years caused its earnings per share to fall by 47.2% annually while its revenue grew
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Mercury Systems is trading at $46.90 per share, or 91.9x forward price-to-earnings. If you’re considering MRCY for your portfolio, see our FREE research report to learn more.
Two Industrials Stocks to Watch:
Nextracker (NXT)
Market Cap: $6.46 billion
With its technology playing a key role in the massive 1.2 gigawatt Noor Abu Dabhi solar farm project, Nextracker (NASDAQ: NXT) is a provider of solar tracker systems that help solar panels follow the sun.
Why Is NXT a Good Business?
- Average backlog growth of 56.1% over the past two years shows it has a steady sales pipeline that will drive future orders
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 131% annually, topping its revenue gains
- Free cash flow margin increased by 13.1 percentage points over the last five years, giving the company more capital to invest or return to shareholders
Nextracker’s stock price of $44.40 implies a valuation ratio of 13.8x forward price-to-earnings. Is now a good time to buy? Find out in our full research report, it’s free.
ITT (ITT)
Market Cap: $11.01 billion
Playing a crucial role in the development of the first transatlantic television transmission in 1956, ITT (NYSE: ITT) provides motion and fluid handling equipment for various industries
Why Are We Positive On ITT?
- 10.2% annual revenue growth over the last two years surpassed the sector average as its offerings resonated with customers
- Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures, and its returns are growing as it capitalizes on even better market opportunities
At $135.12 per share, ITT trades at 20.8x forward price-to-earnings. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market - and we’re zeroing in on the stocks that could benefit immensely.
Take advantage of the rebound 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 Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.
