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 22.2% return over the past six months has topped the S&P 500 by 13.7 percentage points.
Nevertheless, investors must be mindful as the cycle can unexpectedly turn. When this inevitably happens, only the elite companies will survive and ultimately thrive. Keeping that in mind, here is one industrials stock poised to generate sustainable market-beating returns and two we’re passing on.
Two Industrials Stocks to Sell:
Avis Budget Group (CAR)
Market Cap: $6.70 billion
The parent company of brands such as Zipcar and Budget Truck Rental, Avis (NASDAQ: CAR) is a provider of car rental and mobility solutions.
Why Does CAR Worry Us?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 1% annually over the last two years
- Eroding returns on capital suggest its historical profit centers are aging
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Avis Budget Group is trading at $148.75 per share, or 11.4x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than CAR.
International Paper (IP)
Market Cap: $18.51 billion
Established in 1898, International Paper (NYSE: IP) produces containerboard, pulp, paper, and materials used in packaging and printing applications.
Why Is IP Risky?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 3.9% over the last five years was below our standards for the industrials sector
- Earnings per share fell by 15.5% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
International Paper’s stock price of $38.00 implies a valuation ratio of 22.3x forward P/E. To fully understand why you should be careful with IP, check out our full research report (it’s free).
One Industrials Stock to Buy:
Howmet (HWM)
Market Cap: $105.9 billion
Inventing the first forged aluminum truck wheel, Howmet (NYSE: HWM) specializes in lightweight metals engineering and manufacturing multi-material components used in vehicles.
What Makes HWM Stand Out?
- Annual revenue growth of 12.3% over the past five years was outstanding, reflecting market share gains this cycle
- Share repurchases over the last two years enabled its annual earnings per share growth of 43.7% to outpace its revenue gains
- Free cash flow margin jumped by 13.2 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
At $268.12 per share, Howmet trades at 51x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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.
