1 Industrials Stock for Long-Term Investors and 2 That Underwhelm

Even if they go mostly unnoticed, industrial businesses are the backbone of our country. Their momentum is also rising as lower interest rates have incentivized higher capital spending. As a result, the industry has posted a 23.7% gain over the past six months, beating the S&P 500 by 6.9 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 swiping left on.

Two Industrials Stocks to Sell:

Vicor (VICR)

Market Cap: $2.42 billion

Founded by a researcher at the Massachusetts Institute of Technology, Vicor (NASDAQ:VICR) provides electrical power conversion and delivery products for a range of industries.

Why Is VICR Not Exciting?

1. Backlog failed to grow over the past two years, suggesting the company may need to tweak its product roadmap and go-to-market strategy
2. Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 10.9 percentage points
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Vicor is trading at $53.84 per share, or 43.1x forward P/E. To fully understand why you should be careful with VICR, check out our full research report (it’s free).

Great Lakes Dredge & Dock (GLDD)

Market Cap: $834.3 million

Founded as Lydon & Drews dredging company, Great Lakes Dredge & Dock (NASDAQ:GLDD) provides dredging services, land reclamation, and coastal protection projects in the United States and internationally.

Why Are We Wary of GLDD?

1. 2.9% annual revenue growth over the last five years was slower than its industrials peers
2. Estimated sales decline of 1.3% for the next 12 months implies a challenging demand environment
3. Cash burn makes us question whether it can achieve sustainable long-term growth

Great Lakes Dredge & Dock’s stock price of $12.16 implies a valuation ratio of 15.4x forward P/E. Check out our free in-depth research report to learn more about why GLDD doesn’t pass our bar.

One Industrials Stock to Buy:

HEICO (HEI)

Market Cap: $39.04 billion

Founded in 1957, HEICO (NYSE:HEI) manufactures and services aerospace and electronic components for commercial aviation, defense, space, and other industries.

Why Will HEI Beat the Market?

1. Core business can prosper without any help from acquisitions as its organic revenue growth averaged 9.6% over the past two years
2. Earnings per share grew by 26.2% annually over the last two years and trumped its peers
3. Strong free cash flow margin of 17.5% enables it to reinvest or return capital consistently

At $321.74 per share, HEICO trades at 62.8x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

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