Over the past six months, Park-Ohio’s shares (currently trading at $19.29) have posted a disappointing 19.7% loss, well below the S&P 500’s 5.3% gain. This was partly due to its softer quarterly results and might have investors contemplating their next move.

Is there a buying opportunity in Park-Ohio, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Do We Think Park-Ohio Will Underperform?

Even though the stock has become cheaper, we're swiping left on Park-Ohio for now. Here are three reasons why you should be careful with PKOH and a stock we'd rather own.

1. Long-Term Revenue Growth Flatter Than a Pancake

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Unfortunately, Park-Ohio struggled to consistently increase demand as its $1.64 billion of sales for the trailing 12 months was close to its revenue five years ago. This was below our standards and is a sign of poor business quality.

2. Low Gross Margin Reveals Weak Structural Profitability

All else equal, we prefer higher gross margins because they make it easier to generate more operating profits and indicate that a company commands pricing power by offering more differentiated products.

Park-Ohio has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 15.1% gross margin over the last five years. Said differently, Park-Ohio had to pay a chunky $84.93 to its suppliers for every $100 in revenue.

3. Free Cash Flow Margin Dropping

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

As you can see below, Park-Ohio’s margin dropped by 5.1 percentage points over the last five years. Almost any movement in the wrong direction is undesirable because of its already low cash conversion. If the trend continues, it could signal it’s becoming a more capital-intensive business. Park-Ohio’s free cash flow margin for the trailing 12 months was breakeven.

Final Judgment

Park-Ohio falls short of our quality standards. Following the recent decline, the stock trades at 5.7× forward P/E (or $19.29 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better stocks to buy right now. We’d suggest looking at our favorite semiconductor picks and shovels play.

Stocks We Would Buy Instead of Park-Ohio

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.