1 Industrials Stock with Promising Prospects and 2 We Turn Down

Whether you see them or not, industrials businesses play a crucial part in our daily activities. They are also bound to benefit from a friendlier regulatory environment with the Trump administration, and this excitement has led to a six-month gain of 18.8% for the sector - higher than the S&P 500’s 10% return.

Regardless of these results, investors should tread carefully. The diversity of companies in this space means that not all are created equal or well-positioned for the inescapable downturn. Taking that into account, here is one industrials stock boasting a durable advantage and two that may face trouble.

Two Industrials Stocks to Sell:

Applied Industrial (AIT)

Market Cap: $9.71 billion

Formerly called The Ohio Ball Bearing Company, Applied Industrial (NYSE:AIT) distributes industrial products–everything from power tools to industrial valves–and services to a wide variety of industries.

Why Does AIT Worry Us?

1. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
2. Anticipated sales growth of 5.4% for the next year implies demand will be shaky
3. Earnings growth underperformed the sector average over the last two years as its EPS grew by just 5% annually

Applied Industrial’s stock price of $260.40 implies a valuation ratio of 23.5x forward P/E. Dive into our free research report to see why there are better opportunities than AIT.

Thermon (THR)

Market Cap: $1.49 billion

Creating the first packaged tracing systems, Thermon (NYSE:THR) is a leading provider of engineered industrial process heating solutions for process industries.

Why Does THR Fall Short?

1. Annual revenue growth of 3.5% over the last two years was below our standards for the industrials sector
2. Estimated sales growth of 4% for the next 12 months is soft and implies weaker demand
3. Earnings per share lagged its peers over the last two years as they only grew by 5.6% annually

Thermon is trading at $45.16 per share, or 22.2x forward P/E. Check out our free in-depth research report to learn more about why THR doesn’t pass our bar.

One Industrials Stock to Watch:

Distribution Solutions (DSGR)

Market Cap: $1.31 billion

Founded in 1952, Distribution Solutions (NASDAQ:DSGR) provides supply chain solutions and distributes industrial, safety, and maintenance products to various industries.

Why Are We Positive On DSGR?

1. Annual revenue growth of 15.1% over the last two years was superb and indicates its market share increased during this cycle
2. Sound unit economics and 33.6% gross margin allow for higher marketing and R&D budgets versus competitors
3. Earnings per share grew by 34.8% annually over the last two years and trumped its peers

At $28.41 per share, Distribution Solutions trades at 17.8x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.

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