Whether you see them or not, industrials businesses play a crucial part in our daily activities. Still, their generally high capital requirements expose them to the ups and downs of economic cycles, and the industry’s six-month return of 2.8% has fallen short of the S&P 500’s 5% rise.
A cautious approach is imperative when dabbling in these companies as the losers can be left for dead when the cycle naturally turns and the winners consolidate. On that note, here are three industrials stocks we’re steering clear of.
Graco (GGG)
Market Cap: $14.01 billion
Founded in 1926, Graco (NYSE: GGG) is an industrial company specializing in the development and manufacturing of fluid-handling systems and products.
Why Does GGG Fall Short?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Waning returns on capital imply its previous profit engines are losing steam
Graco’s stock price of $84.57 implies a valuation ratio of 27.4x forward P/E. If you’re considering GGG for your portfolio, see our FREE research report to learn more.
KB Home (KBH)
Market Cap: $3.87 billion
The first homebuilder to be listed on the NYSE, KB Home (NYSE: KB) is a homebuilding company targeting the first-time home buyer and move-up buyer markets.
Why Do We Pass on KBH?
- Demand cratered as it couldn’t win new orders over the past two years, leading to an average 20.8% decline in its backlog
- Projected sales decline of 10.6% over the next 12 months indicates demand will continue deteriorating
- Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
At $56.85 per share, KB Home trades at 8.1x forward P/E. Read our free research report to see why you should think twice about including KBH in your portfolio.
Taylor Morrison Home (TMHC)
Market Cap: $6.02 billion
Named “America’s Most Trusted Home Builder” in 2019, Taylor Morrison Home (NYSE: TMHC) builds single family homes and communities across the United States.
Why Should You Sell TMHC?
- Product roadmap and go-to-market strategy need to be reconsidered as its backlog has averaged 12.7% declines over the past two years
- Projected sales decline of 7.2% for the next 12 months points to an even tougher demand environment ahead
- Earnings per share have contracted by 2.1% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
Taylor Morrison Home is trading at $60.91 per share, or 7.9x forward P/E. If you’re considering TMHC for your portfolio, see our FREE research report to learn more.
Stocks We Like More
When Trump unveiled his aggressive tariff plan in April 2024, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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