Even if they go mostly unnoticed, industrial businesses are the backbone of our country. 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 5.1% for the sector - higher than the S&P 500’s 2.3% return.
Regardless of these results, investors should tread carefully. The diversity of companies in this space means that not all are created equal or well-positioned for the inescapable downturn. With that said, here is one industrials stock boasting a durable advantage and two that may face trouble.
Two Industrials Stocks to Sell:
Ameresco (AMRC)
Market Cap: $1.39 billion
Having played a role in upgrading the energy solutions of Alcatraz Island, Ameresco (NYSE: AMRC) provides energy and renewable energy solutions for various sectors.
Why Are We Wary of AMRC?
- Earnings per share fell by 5.4% annually over the last five years while its revenue grew, partly because it diluted shareholders
- Cash-burning history makes us doubt the long-term viability of its business model
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
Ameresco is trading at $26.28 per share, or 22.6x forward P/E. If you’re considering AMRC for your portfolio, see our FREE research report to learn more.
Expeditors (EXPD)
Market Cap: $18.99 billion
Expeditors (NYSE: EXPD) offers air and ocean freight as well as brokerage services.
Why Is EXPD Not Exciting?
- The company has faced growth challenges as its 2.9% annual revenue increases over the last five years fell short of other industrials companies
- Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 13.5%
- Diminishing returns on capital suggest its earlier profit pools are drying up
At $142.24 per share, Expeditors trades at 23.4x forward P/E. Dive into our free research report to see why there are better opportunities than EXPD.
One Industrials Stock to Watch:
Bel Fuse (BELFA)
Market Cap: $2.44 billion
Founded by 26-year-old Elliot Bernstein during the electronics boom after WW2, Bel Fuse (NASDAQ: BELF.A) provides electronic systems and devices to the telecommunications, networking, transportation, and industrial sectors.
Why Are We Positive On BELFA?
- Operating margin improvement of 11.2 percentage points over the last five years demonstrates its ability to scale efficiently
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 47.7% over the last five years outstripped its revenue performance
- Free cash flow margin expanded by 11 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
Bel Fuse’s stock price of $176.44 implies a valuation ratio of 26.8x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
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