Whether you see them or not, industrials businesses play a crucial part in our daily activities. 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 18.8% return over the past six months has topped the S&P 500 by 8.8 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. On that note, here are three industrials stocks that may face trouble.
Avis Budget Group (CAR)
Market Cap: $4.05 billion
The parent company of brands such as Zipcar and Budget Truck Rental, Avis (NASDAQ: CAR) is a provider of car rental and mobility solutions.
Why Does CAR Give Us Pause?
- Demand for its offerings was relatively low as its number of available rental days - car rental has underwhelmed
- Diminishing returns on capital suggest its earlier profit pools are drying up
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
Avis Budget Group’s stock price of $114.98 implies a valuation ratio of 14.2x forward P/E. Dive into our free research report to see why there are better opportunities than CAR.
ESAB (ESAB)
Market Cap: $7.35 billion
Having played a significant role in the construction of the iconic Sydney Opera House, ESAB (NYSE: ESAB) manufactures and sells welding and cutting equipment for numerous industries.
Why Are We Hesitant About ESAB?
- Sales stagnated over the last two years and signal the need for new growth strategies
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Free cash flow margin dropped by 3.2 percentage points over the last five years, implying the company became more capital intensive as competition picked up
At $121.10 per share, ESAB trades at 20.6x forward P/E. If you’re considering ESAB for your portfolio, see our FREE research report to learn more.
Stratasys (SSYS)
Market Cap: $914.2 million
Born from the Founder’s idea of making a toy frog with a glue gun, Stratasys (NASDAQ: SSYS) offers 3D printers and related materials, software, and services to many industries.
Why Do We Avoid SSYS?
- Annual sales declines of 5.6% for the past two years show its products and services struggled to connect with the market during this cycle
- Historical operating margin losses point to an inefficient cost structure
- 6.1 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
Stratasys is trading at $10.66 per share, or 57.6x forward P/E. Check out our free in-depth research report to learn more about why SSYS doesn’t pass our bar.
Stocks We Like More
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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.
