1 Industrials Stock with Exciting Potential and 2 We Brush Off

Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. But their prominence also brings high exposure to the ups and downs of economic cycles. Luckily, the tide is turning in their favor as the industry’s 21% return over the past six months has topped 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. With that said, here is one industrials stock boasting a durable advantage and two we’re swiping left on.

Two Industrials Stocks to Sell:

Wabash (WNC)

Market Cap: $443.2 million

With its first trailer reportedly built on two sawhorses, Wabash (NYSE:WNC) offers semi trailers, liquid transportation containers, truck bodies, and equipment for moving goods.

Why Do We Steer Clear of WNC?

1. Backlog has dropped by 35.8% on average over the past two years, suggesting it’s losing orders as competition picks up
2. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
3. Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution

Wabash’s stock price of $10.97 implies a valuation ratio of 26.3x forward P/E. To fully understand why you should be careful with WNC, check out our full research report (it’s free).

NN (NNBR)

Market Cap: $77.3 million

Formerly known as Nuturn, NN (NASDAQ:NNBR) provides metal components, bearings, and plastic and rubber components to the automotive, aerospace, medical, and industrial sectors.

Why Do We Think NNBR Will Underperform?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 7.4% annually over the last two years
2. Performance over the past five years was negatively impacted by new share issuances as its earnings per share fell by 18.8% annually while its revenue was flat
3. Cash-burning tendencies make us wonder if it can sustainably generate shareholder value

At $1.55 per share, NN trades at 24.6x forward P/E. Read our free research report to see why you should think twice about including NNBR in your portfolio.

One Industrials Stock to Buy:

EMCOR (EME)

Market Cap: $32.13 billion

Through its network of over 70 subsidiaries, EMCOR (NYSE:EME) provides electrical, mechanical, and building construction and services

Why Do We Love EME?

1. Market share has increased this cycle as its 15.9% annual revenue growth over the last two years was exceptional
2. Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
3. Returns on capital are climbing as management makes more lucrative bets

EMCOR is trading at $714.50 per share, or 26.3x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.

High-Quality Stocks for All Market Conditions

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