Whether you see them or not, industrials businesses play a crucial part in our daily activities. But their prominence also brings high exposure to the ups and downs of economic cycles. Luckily, the tide is turning in their favor as the industry’s 38% return over the past six months has topped the S&P 500 by 14.1 percentage points.
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. Keeping that in mind, here are three industrials stocks best left ignored.
Advanced Energy (AEIS)
Market Cap: $7.63 billion
Pioneering technologies for radio frequency power delivery, Advanced Energy (NASDAQ: AEIS) provides power supplies, thermal management systems, and measurement and control instruments for various manufacturing processes.
Why Should You Dump AEIS?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 5.9% annually over the last two years
- Performance over the past two years shows each sale was less profitable as its earnings per share dropped by 9.9% annually, worse than its revenue
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Advanced Energy’s stock price of $211.70 implies a valuation ratio of 33.6x forward P/E. Check out our free in-depth research report to learn more about why AEIS doesn’t pass our bar.
Expeditors (EXPD)
Market Cap: $15.99 billion
Expeditors (NYSE: EXPD) offers air and ocean freight as well as brokerage services.
Why Do We Think EXPD Will Underperform?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 5.5% annually over the last two years
- Earnings per share have dipped by 4.4% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Waning returns on capital imply its previous profit engines are losing steam
At $117.81 per share, Expeditors trades at 21.6x forward P/E. Read our free research report to see why you should think twice about including EXPD in your portfolio.
Allegion (ALLE)
Market Cap: $14.39 billion
Allegion plc (NYSE: ALLE) is a provider of security products and solutions that keep people and assets safe and secure in various environments.
Why Are We Hesitant About ALLE?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Estimated sales growth of 7.3% for the next 12 months is soft and implies weaker demand
- Diminishing returns on capital suggest its earlier profit pools are drying up
Allegion is trading at $167.80 per share, or 19.4x forward P/E. If you’re considering ALLE for your portfolio, see our FREE research report to learn more.
Stocks We Like More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out 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 183% over the last five years (as of March 31st 2025).
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