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 37.5% for the sector - higher than the S&P 500’s 24.7% return.
Nevertheless, investors must be mindful as the cycle can unexpectedly turn. When this inevitably happens, only the elite companies will survive and ultimately thrive. Keeping that in mind, here is one industrials stock poised to generate sustainable market-beating returns and two we’re swiping left on.
Two Industrials Stocks to Sell:
Champion Homes (SKY)
Market Cap: $4.39 billion
Founded in 1951, Champion Homes (NYSE: SKY) is a manufacturer of modular homes and buildings in North America.
Why Does SKY Worry Us?
- 4.4% annual revenue growth over the last two years was slower than its industrials peers
- Incremental sales over the last two years were much less profitable as its earnings per share fell by 19.2% annually while its revenue grew
- Eroding returns on capital suggest its historical profit centers are aging
Champion Homes’s stock price of $77.61 implies a valuation ratio of 23.1x forward P/E. Dive into our free research report to see why there are better opportunities than SKY.
Waste Connections (WCN)
Market Cap: $44.49 billion
Operating a network of municipal solid waste landfills in the U.S. and Canada, Waste Connections (NYSE: WCN) is North America's third-largest waste management company providing collection, disposal, and recycling services.
Why Does WCN Fall Short?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 4.1 percentage points
- Underwhelming 6.6% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its falling returns suggest its earlier profit pools are drying up
Waste Connections is trading at $173.01 per share, or 31.4x forward P/E. To fully understand why you should be careful with WCN, check out our full research report (it’s free).
One Industrials Stock to Buy:
American Superconductor (AMSC)
Market Cap: $2.68 billion
Founded in 1987, American Superconductor (NASDAQ: AMSC) has shifted from superconductor research to developing power systems, adapting to changing energy grid needs and naval technology requirements.
Why Are We Backing AMSC?
- Market share has increased this cycle as its 49.8% annual revenue growth over the last two years was exceptional
- Free cash flow margin is now positive, showing the company is at an important crossroads
- Rising returns on capital show the company is starting to reap the benefits of its past investments
At $59.54 per share, American Superconductor trades at 103.9x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even 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).
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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