2 Industrials Stocks with Solid Fundamentals and 1 We Question

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 21% gain over the past six months, beating the S&P 500 by 12.5 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. Taking that into account, here are two industrials stocks we think can generate sustainable market-beating returns and one best left ignored.

One Industrials Stock to Sell:

Landstar (LSTR)

Market Cap: $5.50 billion

Covering billions of miles throughout North America, Landstar (NASDAQ:LSTR) is a transportation company specializing in freight and last-mile delivery services.

Why Do We Steer Clear of LSTR?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 5.4% annually over the last two years
2. Earnings per share have contracted by 6.1% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
3. Eroding returns on capital suggest its historical profit centers are aging

Landstar is trading at $161.44 per share, or 30.5x forward P/E. Dive into our free research report to see why there are better opportunities than LSTR.

Two Industrials Stocks to Watch:

Rivian (RIVN)

Market Cap: $16.83 billion

The manufacturer of Amazon’s delivery trucks, Rivian (NASDAQ:RIVN) designs, manufactures, and sells electric vehicles and commercial delivery vans.

Why Does RIVN Stand Out?

1. Impressive 24.2% annual revenue growth over the last two years indicates it’s winning market share this cycle
2. Incremental sales over the last two years have been highly profitable as its earnings per share increased by 33.4% annually, topping its revenue gains

Rivian’s stock price of $13.47 implies a valuation ratio of 2.9x forward price-to-sales. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.

First Solar (FSLR)

Market Cap: $25.15 billion

Headquartered in Arizona, First Solar (NASDAQ:FSLR) specializes in manufacturing solar panels and providing photovoltaic solar energy solutions.

Why Will FSLR Outperform?

1. Impressive 26.4% annual revenue growth over the last two years indicates it’s winning market share this cycle
2. Incremental sales significantly boosted profitability as its annual earnings per share growth of 71.6% over the last two years outstripped its revenue performance
3. Free cash flow profile has moved into positive territory over the last five years, indicating the company has passed a significant test

At $233.58 per share, First Solar trades at 10.9x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

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