Whether you see them or not, industrials businesses play a crucial part in our daily activities. 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 17.4% for the sector - higher than the S&P 500’s 15.3% 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 are three industrials stocks best left ignored.
Albany (AIN)
Market Cap: $1.38 billion
Founded in 1895, Albany (NYSE: AIN) is a global textiles and materials processing company, specializing in machine clothing for paper mills and engineered composite structures for aerospace and other industries.
Why Do We Steer Clear of AIN?
- 2.5% annual revenue growth over the last two years was slower than its industrials peers
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 9.9 percentage points
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Albany is trading at $48.24 per share, or 25.8x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than AIN.
C.H. Robinson Worldwide (CHRW)
Market Cap: $17.65 billion
Engaging in contracts with tens of thousands of transportation companies, C.H. Robinson (NASDAQ: CHRW) offers freight transportation and logistics services.
Why Are We Wary of CHRW?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 5.4% annually over the last two years
- Gross margin of 7.4% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Waning returns on capital imply its previous profit engines are losing steam
At $150.27 per share, C.H. Robinson Worldwide trades at 26.5x forward P/E. If you’re considering CHRW for your portfolio, see our FREE research report to learn more.
Crown Holdings (CCK)
Market Cap: $11.15 billion
Formerly Crown Cork & Seal, Crown Holdings (NYSE: CCK) produces packaging products for consumer marketing companies, including food, beverage, household, and industrial products.
Why Is CCK Not Exciting?
- Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
- Projected sales growth of 3.1% for the next 12 months suggests sluggish demand
- Gross margin of 20.5% is below its competitors, leaving less money to invest in areas like marketing and R&D
Crown Holdings’s stock price of $97.82 implies a valuation ratio of 12.1x forward P/E. To fully understand why you should be careful with CCK, check out our full research report (it’s free for active Edge members).
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