Whether you see them or not, industrials businesses play a crucial part in our daily activities. Their momentum is also rising as lower interest rates have incentivized higher capital spending. As a result, the industry has posted a 21.8% gain over the past six months, beating the S&P 500 by 5.8 percentage points.

Although these companies have produced results lately, a cautious approach is imperative. When the cycle naturally turns, the losers can be left for dead while the winners consolidate and take more of the market. Keeping that in mind, here are two industrials stocks boasting durable advantages and one that may face trouble.

One Industrials Stock to Sell:

Tennant (TNC)

Market Cap: $1.5 billion

As the world’s largest manufacturer of autonomous mobile robots, Tennant (NYSE: TNC) designs, manufactures, and sells cleaning products to various sectors.

Why Are We Out on TNC?

1. Sales trends were unexciting over the last two years as its 3% annual growth was below the typical industrials company
2. Incremental sales over the last two years were much less profitable as its earnings per share fell by 2.1% annually while its revenue grew
3. Free cash flow margin dropped by 4.4 percentage points over the last five years, implying the company became more capital intensive as competition picked up

Tennant’s stock price of $81.20 implies a valuation ratio of 13.3x forward P/E. To fully understand why you should be careful with TNC, check out our full research report (it’s free).

Two Industrials Stocks to Watch:

Aris Water (ARIS)

Market Cap: $778.1 million

Primarily serving the oil and gas industry, Aris Water (NYSE: ARIS) is a provider of water handling and recycling solutions.

Why Is ARIS a Top Pick?

1. Annual revenue growth of 23.8% over the past five years was outstanding, reflecting market share gains this cycle
2. Additional sales over the last two years increased its profitability as the 30.4% annual growth in its earnings per share outpaced its revenue
3. Free cash flow margin jumped by 38.4 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends

At $23.79 per share, Aris Water trades at 14.8x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.

Montrose (MEG)

Market Cap: $1.01 billion

Founded to protect a tree-lined two-lane road, Montrose (NYSE: MEG) provides air quality monitoring, environmental laboratory testing, compliance, and environmental consulting services.

Why Are We Fans of MEG?

1. Impressive 18% annual revenue growth over the last two years indicates it’s winning market share this cycle
2. Incremental sales significantly boosted profitability as its annual earnings per share growth of 132% over the last two years outstripped its revenue performance
3. Free cash flow margin expanded by 12.3 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends

Montrose is trading at $28.50 per share, or 20.5x forward EV-to-EBITDA. Is now the right time to buy? See for yourself in our full research report, it’s free.

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