2 Industrials Stocks with Solid Fundamentals and 1 We Ignore

Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. 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 15.9% for the sector - higher than the S&P 500’s 5.1% return.

Although these companies have produced results lately, a cautious approach is imperative. When the cycle naturally turns, the losers can be left for dead while the winners consolidate and take more of the market. With that said, here are two industrials stocks we think can generate sustainable market-beating returns and one we’re swiping left on.

One Industrials Stock to Sell:

Cummins (CMI)

Market Cap: $79.32 billion

With more than half of the heavy-duty truck market using its engines at one point, Cummins (NYSE:CMI) offers engines and power systems.

Why Does CMI Worry Us?

1. Flat sales over the last two years suggest it must find different ways to grow during this cycle
2. Gross margin of 24.6% reflects its high production costs
3. Diminishing returns on capital suggest its earlier profit pools are drying up

At $570.00 per share, Cummins trades at 21.3x forward P/E. Dive into our free research report to see why there are better opportunities than CMI.

Two Industrials Stocks to Watch:

Advanced Drainage (WMS)

Market Cap: $12.55 billion

Originally started as a farm water drainage company, Advanced Drainage Systems (NYSE:WMS) provides clean water management solutions to communities across America.

Why Does WMS Stand Out?

1. Healthy operating margin of 21.6% shows it’s a well-run company with efficient processes, and its profits increased over the last five years as it scaled
2. Free cash flow margin increased by 16.3 percentage points over the last five years, giving the company more capital to invest or return to shareholders
3. ROIC punches in at 22.8%, illustrating management’s expertise in identifying profitable investments, and its returns are climbing as it finds even more attractive growth opportunities

Advanced Drainage is trading at $161.09 per share, or 24.1x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.

United Rentals (URI)

Market Cap: $53.67 billion

Owning the largest rental fleet in the world, United Rentals (NYSE:URI) provides equipment rental and related services to construction, industrial, and infrastructure industries.

Why Are We Fans of URI?

1. Impressive 13.5% annual revenue growth over the last five years indicates it’s winning market share this cycle
2. Disciplined cost controls and effective management resulted in a strong long-term operating margin of 25.9%, and it turbocharged its profits by achieving some fixed cost leverage
3. Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue

United Rentals’s stock price of $851.73 implies a valuation ratio of 17.9x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.

But our AI platform says the party isn't over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.