Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. But their prominence also brings high exposure to the ups and downs of economic cycles. Luckily, the tide is turning in their favor as the industry’s 21.7% return over the past six months has topped the S&P 500 by 5.8 percentage points.
Nevertheless, investors must be mindful as the cycle can unexpectedly turn. When this inevitably happens, only the elite companies will survive and ultimately thrive. With that said, here are three industrials stocks best left ignored.
Rocket Lab (RKLB)
Market Cap: $25.73 billion
Becoming the first private company in the Southern Hemisphere to reach space, Rocket Lab (NASDAQ: RKLB) offers rockets designed for launching small satellites.
Why Are We Wary of RKLB?
- Historically negative EPS raises concerns for risk-averse investors and makes its earnings potential harder to gauge
- Negative free cash flow raises questions about the return timeline for its investments
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
At $52.89 per share, Rocket Lab trades at 38.4x forward price-to-sales. If you’re considering RKLB for your portfolio, see our FREE research report to learn more.
Knight-Swift Transportation (KNX)
Market Cap: $6.77 billion
Covering 1.6 billion loaded miles in 2023 alone, Knight-Swift Transportation (NYSE: KNX) offers less-than-truckload and full truckload delivery services.
Why Should You Dump KNX?
- Sales trends were unexciting over the last two years as its 4.3% annual growth was below the typical industrials company
- Free cash flow margin dropped by 9.1 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Knight-Swift Transportation is trading at $41.69 per share, or 22.8x forward P/E. Check out our free in-depth research report to learn more about why KNX doesn’t pass our bar.
Sunrun (RUN)
Market Cap: $3.71 billion
Helping homeowners use solar energy to power their homes, Sunrun (NASDAQ: RUN) provides residential solar electricity, specializing in panel installation and leasing services.
Why Do We Think Twice About RUN?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 6.2% annually over the last two years
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Sunrun’s stock price of $16.05 implies a valuation ratio of 22.3x forward EV-to-EBITDA. If you’re considering RUN for your portfolio, see our FREE research report to learn more.
Stocks We Like More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound 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 183% over the last five years (as of March 31st 2025).
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