Whether you see them or not, industrials businesses play a crucial part in our daily activities. Still, their generally high capital requirements expose them to the ups and downs of economic cycles, and the industry’s six-month return of 9.8% has fallen short of the S&P 500’s 13% rise.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. Taking that into account, here is one industrials stock boasting a durable advantage and two best left ignored.
Two Industrials Stocks to Sell:
Builders FirstSource (BLDR)
Market Cap: $10.99 billion
Headquartered in Irving, TX, Builders FirstSource (NYSE: BLDR) is a construction materials manufacturer that offers a variety of lumber and lumber-related building products.
Why Does BLDR Give Us Pause?
- Annual sales declines of 4.9% for the past two years show its products and services struggled to connect with the market during this cycle
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Builders FirstSource is trading at $99.09 per share, or 16.7x forward P/E. Dive into our free research report to see why there are better opportunities than BLDR.
Zurn Elkay (ZWS)
Market Cap: $7.51 billion
Claiming to have saved more than 30 billion gallons of water, Zurn Elkay (NYSE: ZWS) provides water management solutions to various industries.
Why Is ZWS Not Exciting?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Earnings per share have dipped by 4.5% annually over the past five years, which is concerning because stock prices follow EPS over the long term
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 16.5 percentage points
Zurn Elkay’s stock price of $44.85 implies a valuation ratio of 28.8x forward P/E. Check out our free in-depth research report to learn more about why ZWS doesn’t pass our bar.
One Industrials Stock to Watch:
Advanced Drainage (WMS)
Market Cap: $10.96 billion
Originally started as a farm water drainage company, Advanced Drainage Systems (NYSE: WMS) provides clean water management solutions to communities across America.
Why Are We Fans of WMS?
- Excellent operating margin of 21.5% highlights the efficiency of its business model, and it turbocharged its profits by achieving some fixed cost leverage
- Free cash flow margin increased by 11.3 percentage points over the last five years, giving the company more capital to invest or return to shareholders
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures, and its returns are climbing as it finds even more attractive growth opportunities
At $140.92 per share, Advanced Drainage trades at 23.6x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free for active Edge members .
Stocks We Like Even More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in 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 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% 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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