3 Industrials Stocks with Bad Fundamentals

Whether you see them or not, industrials businesses play a crucial part in our daily activities. But they are at the whim of volatile macroeconomic factors that influence capital spending (like interest rates), and the market seems convinced that demand will slow. Due to this bearish outlook, the industry has tumbled by 7.9% over the past six months. This performance was discouraging since the S&P 500 held its ground.

A cautious approach is imperative when dabbling in these companies as the losers can be left for dead when the cycle naturally turns and the winners consolidate. Keeping that in mind, here are three industrials stocks that may face trouble.

Wabash (WNC)

Market Cap: $392.7 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 Should You Sell WNC?

1. Demand cratered as it couldn’t win new orders over the past two years, leading to an average 32.8% decline in its backlog
2. High input costs result in an inferior gross margin of 13.9% that must be offset through higher volumes
3. Sales were less profitable over the last five years as its earnings per share fell by 29.5% annually, worse than its revenue declines

Wabash’s stock price of $9.38 implies a valuation ratio of 9.8x forward P/E. Dive into our free research report to see why there are better opportunities than WNC.

MYR Group (MYRG)

Market Cap: $2.57 billion

Constructing electrical and phone lines in the American Midwest dating back to the 1890s, MYR Group (NASDAQ:MYRG) is a specialty contractor in the electrical construction industry.

Why Do We Steer Clear of MYRG?

1. Sales pipeline suggests its future revenue growth likely won’t meet our standards as its backlog hasn’t budged over the past two years
2. Earnings per share fell by 1.9% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
3. Diminishing returns on capital suggest its earlier profit pools are drying up

At $165.57 per share, MYR Group trades at 26.4x forward P/E. If you’re considering MYRG for your portfolio, see our FREE research report to learn more.

Keysight (KEYS)

Market Cap: $27.87 billion

Spun off from Hewlett-Packard in 2014, Keysight (NYSE:KEYS) offers electronic measurement products for use in various sectors.

Why Should You Dump KEYS?

1. Product roadmap and go-to-market strategy need to be reconsidered as its backlog has averaged 3.3% declines over the past two years
2. Earnings per share have contracted by 9.8% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
3. Diminishing returns on capital suggest its earlier profit pools are drying up

Keysight is trading at $161.45 per share, or 22.2x forward P/E. Dive into our free research report to see why there are better opportunities than KEYS.

Stocks We Like More

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