Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. Unfortunately, this role also comes with a demand profile tethered to the ebbs and flows of the broader economy, and investors seem to be forecasting a downturn - over the past six months, the industry has pulled back by 11.8%. This drawdown was worse than the S&P 500’s 2.2% decline.
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 resilient industrials stock at the top of our wish list and two we’re swiping left on.
Two IndustrialsStocks to Sell:
Teledyne (TDY)
Market Cap: $23.31 billion
Playing a role in mapping the ocean floor as we know it today, Teledyne (NYSE: TDY) offers digital imaging and instrumentation products for various industries.
Why Are We Wary of TDY?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its falling returns suggest its earlier profit pools are drying up
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $497.49 per share, Teledyne trades at 22.4x forward P/E. Check out our free in-depth research report to learn more about why TDY doesn’t pass our bar.
Lennar (LEN)
Market Cap: $27.84 billion
One of the largest homebuilders in America, Lennar (NYSE: LEN) is known for constructing affordable, move-up, and retirement homes across a range of markets and communities.
Why Do We Avoid LEN?
- Demand cratered as it couldn’t win new orders over the past two years, leading to an average 22.1% decline in its backlog
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 10.8% annually
- Free cash flow margin dropped by 13.3 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Lennar is trading at $105.72 per share, or 8.2x forward P/E. Read our free research report to see why you should think twice about including LEN in your portfolio.
One Industrials Stock to Buy:
Federal Signal (FSS)
Market Cap: $5.70 billion
Developing sirens that warned of air raid attacks or fallout during the Cold War, Federal Signal (NYSE: FSS) provides safety and emergency equipment for government agencies, municipalities, and industrial companies.
Why Do We Love FSS?
- Demand is greater than supply as the company’s 10.8% average backlog growth over the past two years shows it’s securing new contracts and accumulating more orders than it can fulfill
- Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Earnings per share grew by 28.7% annually over the last two years, massively outpacing its peers
Federal Signal’s stock price of $93.88 implies a valuation ratio of 24.5x 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
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Growth Stocks for this month. 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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.
