Even if they go mostly unnoticed, industrial businesses are the backbone of our country. 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 10.4% over the past six months. This drawdown was worse than the S&P 500’s 2% decline.
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. With that said, here are three industrials stocks we’re passing on.
Masco (MAS)
Market Cap: $12.72 billion
Headquartered just outside of Detroit, MI, Masco (NYSE: MAS) designs and manufactures home-building products such as glass shower doors, decorative lighting, bathtubs, and faucets.
Why Are We Out on MAS?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 3.1% annually while its revenue grew
- Waning returns on capital imply its previous profit engines are losing steam
Masco is trading at $60.30 per share, or 13.9x forward P/E. If you’re considering MAS for your portfolio, see our FREE research report to learn more.
Stratasys (SSYS)
Market Cap: $788.4 million
Born from the Founder’s idea of making a toy frog with a glue gun, Stratasys (NASDAQ: SSYS) offers 3D printers and related materials, software, and services to many industries.
Why Do We Think SSYS Will Underperform?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 2.1% annually over the last five years
- Performance over the past five years was negatively impacted by new share issuances as its earnings per share dropped by 34% annually, worse than its revenue
- Negative free cash flow raises questions about the return timeline for its investments
At $9.45 per share, Stratasys trades at 27.1x forward P/E. Read our free research report to see why you should think twice about including SSYS in your portfolio.
Douglas Dynamics (PLOW)
Market Cap: $551.8 million
Once manufacturing snowplows designed for the iconic jeep vehicle precursor, Douglas Dynamics (NYSE: PLOW) offers snow and ice equipment for the roads and sidewalks.
Why Should You Dump PLOW?
- Sales were flat over the last five years, indicating it’s failed to expand this cycle
- Performance over the past five years shows each sale was less profitable, as its earnings per share fell by 6.3% annually
- Diminishing returns on capital suggest its earlier profit pools are drying up
Douglas Dynamics’s stock price of $23.89 implies a valuation ratio of 13.4x forward P/E. To fully understand why you should be careful with PLOW, check out our full research report (it’s free).
Stocks That Overcame Trump’s 2018 Tariffs
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.
