Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. But this role also comes with a demand profile tethered to the ebbs and flows of the broader economy. Thankfully, industrial end markets were stable over the past six months as the industry’s 1.5% gain has nearly mirrored the S&P 500.
Although these companies have produced results lately, a cautious approach is imperative. When the cycle naturally turns, the losers can be left for dead while the winners consolidate and take more of the market. Taking that into account, here is one industrials stock poised to generate sustainable market-beating returns and two we’re steering clear of.
Two IndustrialsStocks to Sell:
Veralto (VLTO)
Market Cap: $25.06 billion
Spun off from Danaher in 2023, Veralto (NYSE: VLTO) provides water analytics and treatment solutions.
Why Are We Out on VLTO?
- 3.6% annual revenue growth over the last two years was slower than its industrials peers
- Estimated sales growth of 3.6% for the next 12 months is soft and implies weaker demand
- Earnings per share fell by 1.7% annually over the last two years while its revenue grew, partly because it diluted shareholders
Veralto’s stock price of $101.12 implies a valuation ratio of 27.2x forward P/E. Dive into our free research report to see why there are better opportunities than VLTO.
Winnebago (WGO)
Market Cap: $802.5 million
Created to provide high-quality, affordable RVs to the post-war American family, Winnebago (NYSE: WGO) is a manufacturer of recreational vehicles, providing a range of motorhomes, travel trailers, and fifth-wheel products for outdoor and adventure lifestyles.
Why Do We Avoid WGO?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 16.1% annually over the last two years
- Diminishing returns on capital suggest its earlier profit pools are drying up
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
At $28.77 per share, Winnebago trades at 10.2x forward P/E. Read our free research report to see why you should think twice about including WGO in your portfolio.
One Industrials Stock to Buy:
Construction Partners (ROAD)
Market Cap: $6.06 billion
Founded in 2001, Construction Partners (NASDAQ: ROAD) is a civil infrastructure company that builds and maintains roads, highways, and other infrastructure projects.
Why Is ROAD a Good Business?
- Exciting sales outlook for the upcoming 12 months calls for 40.5% growth, an acceleration from its two-year trend
- Earnings per share have massively outperformed its peers over the last two years, increasing by 91% annually
- Historical investments are beginning to pay off as its returns on capital are growing
Construction Partners is trading at $108.09 per share, or 45.9x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 6 Stocks for this week. 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
