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 confused about where we could go next. This uncertainty has led to a flat return for the industry over the past six months while the S&P 500 was up 4.5%.

A cautious approach is imperative when dabbling in these companies as the losers can be left for dead when the cycle naturally turns and the winners consolidate. On that note, here are three industrials stocks we’re passing on.

Apogee (APOG)

Market Cap: $884.7 million

Involved in the design of the Apple Store on Fifth Avenue in New York City, Apogee (NASDAQ: APOG) sells architectural products and services such as high-performance glass for commercial buildings.

Why Is APOG Risky?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 2.4% annually over the last two years
2. Flat earnings per share over the last two years lagged its peers
3. Free cash flow margin shrank by 3.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

At $41.25 per share, Apogee trades at 9.9x forward P/E. To fully understand why you should be careful with APOG, check out our full research report (it’s free).

Flowserve (FLS)

Market Cap: $7.03 billion

Manufacturing the largest pump ever built for nuclear power generation, Flowserve (NYSE: FLS) manufactures and sells flow control equipment for various industries.

Why Are We Cautious About FLS?

1. New orders were hard to come by as its average backlog growth of 3.6% over the past two years underwhelmed
2. Earnings per share lagged its peers over the last five years as they only grew by 5.8% annually
3. Low free cash flow margin of 4.2% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders

Flowserve’s stock price of $53.79 implies a valuation ratio of 16.7x forward P/E. Read our free research report to see why you should think twice about including FLS in your portfolio.

International Paper (IP)

Market Cap: $27.08 billion

Established in 1898, International Paper (NYSE: IP) produces containerboard, pulp, paper, and materials used in packaging and printing applications.

Why Do We Avoid IP?

1. Annual sales declines of 2.1% for the past five years show its products and services struggled to connect with the market during this cycle
2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 11.5 percentage points
3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

International Paper is trading at $51.24 per share, or 7.7x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why IP doesn’t pass our bar.

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 Strong Momentum Stocks for this week. 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 Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.