Even if they go mostly unnoticed, industrial businesses are the backbone of our country. Still, their generally high capital requirements expose them to the ups and downs of economic cycles, and the industry’s six-month return of 4.5% has fallen short of the S&P 500’s 14% rise.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. Keeping that in mind, here is one resilient industrials stock at the top of our wish list and two best left ignored.
Two Industrials Stocks to Sell:
Energy Recovery (ERII)
Market Cap: $359.9 million
Having saved far more than a trillion gallons of water, Energy Recovery (NASDAQ: ERII) provides energy recovery devices to the water treatment, oil and gas, and chemical processing sectors.
Why Is ERII Not Exciting?
- Sales tumbled by 5% annually over the last two years, showing market trends are working against it during this cycle
- Forecasted revenue decline of 36.2% for the upcoming 12 months implies demand will fall even further
- Flat earnings per share over the last two years lagged its peers
Energy Recovery’s stock price of $7.06 implies a valuation ratio of 1,420x forward P/E. Read our free research report to see why you should think twice about including ERII in your portfolio.
Quest Resource (QRHC)
Market Cap: $29.32 million
Recycling corporate waste to help companies be more sustainable, Quest Resource (NASDAQ: QRHC) is a provider of waste and recycling services.
Why Should You Sell QRHC?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 6.8% annually over the last two years
- Low free cash flow margin of -0.4% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- 6× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Quest Resource is trading at $1.39 per share, or 7.4x forward EV-to-EBITDA. To fully understand why you should be careful with QRHC, check out our full research report (it’s free).
One Industrials Stock to Buy:
BWX (BWXT)
Market Cap: $13.41 billion
Contributing components and materials to the famous Manhattan Project in the 1940s, BWX (NYSE: BWXT) is a manufacturer and service provider of nuclear components and fuel for government and commercial industries.
Why Do We Love BWXT?
- Annual revenue growth of 16.2% over the past two years was outstanding, reflecting market share gains this cycle
- Expected revenue growth of 14.4% for the next year suggests its market share will rise
- Free cash flow margin grew by 6.1 percentage points over the last five years, giving the company more chips to play with
At $146.60 per share, BWX trades at 29.1x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
