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 15.9% for the sector - higher than the S&P 500’s 14.3% return.
Although these companies have produced results lately, a cautious approach is imperative. When the cycle naturally turns, the losers can be left for dead while the winners consolidate and take more of the market. On that note, here is one industrials stock boasting a durable advantage and two best left ignored.
Two Industrials Stocks to Sell:
Concrete Pumping (BBCP)
Market Cap: $330 million
Going public via SPAC in 2018, Concrete Pumping (NASDAQ: BBCP) is a provider of concrete pumping and waste management services in the United States and the United Kingdom.
Why Is BBCP Risky?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Free cash flow margin dropped by 7.8 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Concrete Pumping’s stock price of $6.41 implies a valuation ratio of 49.8x forward P/E. Dive into our free research report to see why there are better opportunities than BBCP.
Wabash (WNC)
Market Cap: $374.4 million
With its first trailer reportedly built on two sawhorses, Wabash (NYSE: WNC) offers semi trailers, liquid transportation containers, truck bodies, and equipment for moving goods.
Why Are We Out on WNC?
- Demand cratered as it couldn’t win new orders over the past two years, leading to an average 36.2% decline in its backlog
- Earnings per share have dipped by 39.2% annually over the past five years, which is concerning because stock prices follow EPS over the long term
- 37× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
At $9.24 per share, Wabash trades at 6.5x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why WNC doesn’t pass our bar.
One Industrials Stock to Watch:
Gorman-Rupp (GRC)
Market Cap: $1.22 billion
Powering fluid dynamics since 1934, Gorman-Rupp (NYSE: GRC) has evolved from its Ohio origins into a global manufacturer and seller of pumps and pump systems.
Why Are We Fans of GRC?
- Annual revenue growth of 13.5% over the past five years was outstanding, reflecting market share gains this cycle
- Average backlog growth of 12.7% over the past two years shows it has a steady sales pipeline that will drive future orders
- Earnings growth has massively outpaced its peers over the last two years as its EPS has compounded at 33% annually
Gorman-Rupp is trading at $46.38 per share, or 20.8x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free for active Edge members.
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