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3 Industrials Stocks with Open Questions

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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 sway capital spending, like interest rates. Wariness surrounding these influences has caused the industry to underperform the market as it was flat over the past six months while the S&P 500 climbed by 4.1%.

Some companies can grow regardless of the economic backdrop, but the odds aren’t great for the ones we’re analyzing today. On that note, here are three industrials stocks best left ignored.

Albany (AIN)

Market Cap: $2.11 billion

Founded in 1895, Albany (NYSE: AIN) is a global textiles and materials processing company, specializing in machine clothing for paper mills and engineered composite structures for aerospace and other industries.

Why Should You Sell AIN?

  1. 3% annual revenue growth over the last five years was slower than its industrials peers
  2. Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 9 percentage points
  3. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 6.3% annually

Albany’s stock price of $70.29 implies a valuation ratio of 11.2x forward EV-to-EBITDA. If you’re considering AIN for your portfolio, see our FREE research report to learn more.

Great Lakes Dredge & Dock (GLDD)

Market Cap: $758.1 million

Founded as Lydon & Drews dredging company, Great Lakes Dredge & Dock (NASDAQ: GLDD) provides dredging services, land reclamation, and coastal protection projects in the United States and internationally.

Why Does GLDD Give Us Pause?

  1. Annual revenue growth of 1.8% over the last five years was below our standards for the industrials sector
  2. Cash burn makes us question whether it can achieve sustainable long-term growth
  3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

Great Lakes Dredge & Dock is trading at $11.65 per share, or 16x forward P/E. Read our free research report to see why you should think twice about including GLDD in your portfolio.

Whirlpool (WHR)

Market Cap: $5.18 billion

Credited with introducing the first automatic washing machine, Whirlpool (NYSE: WHR) is a manufacturer of a variety of home appliances.

Why Do We Pass on WHR?

  1. Disappointing unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
  2. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
  3. 9× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

At $93.47 per share, Whirlpool trades at 10x forward P/E. To fully understand why you should be careful with WHR, check out our full research report (it’s free).

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