Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. 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 37.4% for the sector - higher than the S&P 500’s 24.7% 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. Taking that into account, here is one resilient industrials stock at the top of our wish list and two we’re steering clear of.
Two Industrials Stocks to Sell:
AAON (AAON)
Market Cap: $7.97 billion
Backed by two million square feet of lab testing space, AAON (NASDAQ: AAON) makes heating, ventilation, and air conditioning equipment for different types of buildings.
Why Does AAON Give Us Pause?
- Efficiency has decreased over the last five years as its operating margin fell by 5.2 percentage points
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 8.3% annually
- Free cash flow margin shrank by 26.3 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
AAON’s stock price of $99.65 implies a valuation ratio of 59.3x forward P/E. Dive into our free research report to see why there are better opportunities than AAON.
Mayville Engineering (MEC)
Market Cap: $335 million
Originally founded solely on tool and die manufacturing, Mayville Engineering Company (NYSE: MEC) specializes in metal fabrication, tube bending, and welding to be used in various industries.
Why Do We Think MEC Will Underperform?
- Annual sales declines of 2% for the past two years show its products and services struggled to connect with the market during this cycle
- Gross margin of 12.8% reflects its high production costs
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
At $16.49 per share, Mayville Engineering trades at 94.6x forward P/E. Read our free research report to see why you should think twice about including MEC in your portfolio.
One Industrials Stock to Buy:
Howmet (HWM)
Market Cap: $77.09 billion
Inventing the first forged aluminum truck wheel, Howmet (NYSE: HWM) specializes in lightweight metals engineering and manufacturing multi-material components used in vehicles.
Why Should You Buy HWM?
- Market share has increased this cycle as its 11.6% annual revenue growth over the last two years was exceptional
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 41.9% exceeded its revenue gains over the last two years
- Free cash flow margin grew by 11.3 percentage points over the last five years, giving the company more chips to play with
Howmet is trading at $191.99 per share, or 48.9x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .
Stocks We Like Even More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 9 Market-Beating Stocks. 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).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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