Even if they go mostly unnoticed, industrial businesses are the backbone of our country. 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 11.8% over the past six months. This drop was worse than the S&P 500’s 2.2% fall.

Some companies can grow regardless of the economic backdrop, but the odds aren’t great for the ones we’re analyzing today. Taking that into account, here are three industrials stocks we’re swiping left on.

Beacon Roofing Supply (BECN)

Market Cap: $7.72 billion

Established in 1928, Beacon Roofing Supply (NASDAQ: BECN) distributes residential and commercial roofing materials and complementary building products.

Why Does BECN Give Us Pause?

1. Estimated sales growth of 4.3% for the next 12 months implies demand will slow from its two-year trend
2. Earnings per share have contracted by 4.6% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 5.4 percentage points

At $124.22 per share, Beacon Roofing Supply trades at 15.6x forward P/E. To fully understand why you should be careful with BECN, check out our full research report (it’s free).

Kimball Electronics (KE)

Market Cap: $453 million

Founded in 1961, Kimball Electronics (NYSE: KE) is a global contract manufacturer specializing in electronics and manufacturing solutions for automotive, medical, and industrial markets.

Why Is KE Risky?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 5% annually over the last two years
2. Earnings per share have contracted by 13.7% annually over the last four years, a headwind for returns as stock prices often echo long-term EPS performance
3. Poor free cash flow margin of -0.3% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends

Kimball Electronics’s stock price of $18.86 implies a valuation ratio of 17.3x forward P/E. Read our free research report to see why you should think twice about including KE in your portfolio.

Park-Ohio (PKOH)

Market Cap: $244.8 million

Based in Cleveland, Park-Ohio (NASDAQ: PKOH) provides supply chain management services, capital equipment, and manufactured components.

Why Do We Avoid PKOH?

1. Sales stagnated over the last five years and signal the need for new growth strategies
2. High input costs result in an inferior gross margin of 15.1% that must be offset through higher volumes
3. Free cash flow margin dropped by 5.1 percentage points over the last five years, implying the company became more capital intensive as competition picked up

Park-Ohio is trading at $18.05 per share, or 5.6x forward P/E. If you’re considering PKOH for your portfolio, see our FREE research report to learn more.

Stocks We Like More

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market 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.