Gates Industrial Corporation’s 23.4% return over the past six months has outpaced the S&P 500 by 15.1%, and its stock price has climbed to $26.91 per share. This run-up might have investors contemplating their next move.
Is there a buying opportunity in Gates Industrial Corporation, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is Gates Industrial Corporation Not Exciting?
Despite the momentum, we’re swiping left on Gates Industrial Corporation for now. Here are three reasons why there are better opportunities than GTES, plus one stock we’d rather own.
1. Core Business Falling Behind as Demand Declines
Investors interested in Engineered Components and Systems companies should track organic revenue in addition to reported revenue. This metric gives visibility into Gates Industrial Corporation’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Gates Industrial Corporation’s organic revenue averaged 1.3% year-on-year declines. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Gates Industrial Corporation might have to lean into acquisitions to grow, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus). 
2. Recent EPS Growth Below Our Standards
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
Gates Industrial Corporation’s EPS grew at a weak 3.5% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its 1.3% annualized revenue declines and tells us management adapted its cost structure in response to a challenging demand environment.
3. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Gates Industrial Corporation historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 7%, somewhat low compared to the best industrials companies that consistently pump out 20%+.
Final Judgment
Gates Industrial Corporation isn’t a terrible business, but it doesn’t pass our quality test. With its shares topping the market in recent months, the stock trades at $26.91 per share (or a forward price-to-sales ratio of 1.9×). The market typically values companies like Gates Industrial Corporation based on their anticipated profits for the next 12 months, but there aren’t enough published estimates to arrive at a reliable number. You should avoid this stock for now - better opportunities lie elsewhere. Let us point you toward our favorite semiconductor picks and shovels play.
Stocks We Would Buy Instead of Gates Industrial Corporation
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
Stocks that have made our list 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.
