Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. But they are at the whim of volatile macroeconomic factors that influence capital spending (like interest rates), and the market seems convinced that demand will slow. Due to this bearish outlook, the industry has tumbled by 5.4% over the past six months. This drop was discouraging since the S&P 500 held steady.

The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. Keeping that in mind, here is one industrials stock poised to generate sustainable market-beating returns and two that may face trouble.

Two Industrials Stocks to Sell:

Hyster-Yale Materials Handling (HY)

Market Cap: $799.7 million

Playing a significant role in the development of the hydraulic lift truck, Hyster-Yale (NYSE: HY) designs, manufactures, and sells materials handling equipment to various sectors.

Why Are We Cautious About HY?

1. Sales trends were unexciting over the last five years as its 5.5% annual growth was below the typical industrials company
2. Estimated sales decline of 5.4% for the next 12 months implies a challenging demand environment
3. Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 0.4% for the last five years

Hyster-Yale Materials Handling is trading at $45.19 per share, or 8.5x forward price-to-earnings. Read our free research report to see why you should think twice about including HY in your portfolio.

LGI Homes (LGIH)

Market Cap: $1.70 billion

Based in Texas, LGI Homes (NASDAQ: LGIH) is a homebuilding company specializing in constructing affordable, entry-level single-family homes in desirable communities across the United States.

Why Is LGIH Risky?

1. Average backlog growth of 3.4% over the past two years was mediocre and suggests fewer customers signed long-term contracts
2. Diminishing returns on capital suggest its earlier profit pools are drying up
3. Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

At $72 per share, LGI Homes trades at 7.1x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than LGIH.

One Industrials Stock to Buy:

SPX Technologies (SPXC)

Market Cap: $6.46 billion

SPX Technologies (NYSE: SPXC) is an industrial conglomerate catering to the energy, manufacturing, automotive, and aerospace sectors.

Why Do We Love SPXC?

1. Existing business lines can expand without risky acquisitions as its organic revenue growth averaged 9.8% over the past two years
2. Additional sales over the last two years increased its profitability as the 34.3% annual growth in its earnings per share outpaced its revenue
3. Free cash flow margin grew by 5.1 percentage points over the last five years, giving the company more chips to play with

SPX Technologies’s stock price of $139.33 implies a valuation ratio of 22.8x forward price-to-earnings. Is now the time to initiate a position? Find out in our full research report, it’s free.

Stocks We Like Even More

With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run - and we’re laser-focused on finding the best stocks for this upcoming cycle.

Put yourself in the driver’s seat by checking 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 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.