Whether you see them or not, industrials businesses play a crucial part in our daily activities. Still, their generally high capital requirements expose them to the ups and downs of economic cycles, and the market seems to be baking in a prolonged downturn as the industry has shed 10.4% over the past six months. This performance was worse than the S&P 500’s 2% fall.

Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. Taking that into account, here is one resilient industrials stock at the top of our wish list and two best left ignored.

Two Industrials Stocks to Sell:

Acuity Brands (AYI)

Market Cap: $7.40 billion

One of the pioneers of smart lights, Acuity (NYSE: AYI) designs and manufactures light fixtures and building management systems used in various industries.

Why Do We Think Twice About AYI?

1. Annual sales declines of 1.9% for the past two years show its products and services struggled to connect with the market during this cycle
2. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
3. Free cash flow margin shrank by 2.5 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

Acuity Brands is trading at $241.86 per share, or 13.1x forward P/E. To fully understand why you should be careful with AYI, check out our full research report (it’s free).

THOR Industries (THO)

Market Cap: $3.91 billion

Created through the acquisition and merger of various RV manufacturers, THOR Industries manufactures and sells a range of recreational vehicles, including motorhomes and travel trailers, catering to consumers seeking the freedom and comfort of the RV lifestyle.

Why Do We Avoid THO?

1. Annual sales declines of 17.4% for the past two years show its products and services struggled to connect with the market during this cycle
2. Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

At $73.41 per share, THOR Industries trades at 12.8x forward P/E. Read our free research report to see why you should think twice about including THO in your portfolio.

One Industrials Stock to Buy:

AZEK (AZEK)

Market Cap: $7.16 billion

With a significant portion of its products made from recycled materials, AZEK (NYSE: AZEK) designs and manufactures goods for outdoor living spaces.

Why Should You Buy AZEK?

1. Average organic revenue growth of 10.7% over the past two years demonstrates its ability to expand independently without relying on acquisitions
2. Operating margin expanded by 16.2 percentage points over the last five years as it scaled and became more efficient
3. Share repurchases have amplified shareholder returns as its annual earnings per share growth of 41.3% exceeded its revenue gains over the last two years

AZEK’s stock price of $49.77 implies a valuation ratio of 34.2x 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

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 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.