Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. Their momentum is also rising as lower interest rates have incentivized higher capital spending. As a result, the industry has posted a 15.9% gain over the past six months, beating the S&P 500 by 10.8 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. Keeping that in mind, here is one industrials stock poised to generate sustainable market-beating returns and two we’re steering clear of.
Two Industrials Stocks to Sell:
Park-Ohio (PKOH)
Market Cap: $366 million
Based in Cleveland, Park-Ohio (NASDAQ: PKOH) provides supply chain management services, capital equipment, and manufactured components.
Why Do We Think PKOH Will Underperform?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 1.8% annually over the last two years
- Issuance of new shares over the last two years caused its earnings per share to fall by 6.2% annually, even worse than its revenue declines
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
At $26.18 per share, Park-Ohio trades at 8.3x forward P/E. Dive into our free research report to see why there are better opportunities than PKOH.
Trimble (TRMB)
Market Cap: $16.36 billion
Playing a role in the construction of the Paris Grand, Trimble (NASDAQ: TRMB) offers geospatial devices and technology to the agriculture, construction, transportation, and logistics industries.
Why Do We Avoid TRMB?
- Annual sales declines of 2.8% for the past two years show its products and services struggled to connect with the market during this cycle
- 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
- 9.2 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
Trimble’s stock price of $69.30 implies a valuation ratio of 19.5x forward P/E. Read our free research report to see why you should think twice about including TRMB in your portfolio.
One Industrials Stock to Buy:
Rollins (ROL)
Market Cap: $27.9 billion
Operating under multiple brands like Orkin and HomeTeam Pest Defense, Rollins (NYSE: ROL) provides pest and wildlife control services to residential and commercial customers.
Why Should You Buy ROL?
- Market share has increased this cycle as its 11.7% annual revenue growth over the last five years was exceptional
- Offerings are mission-critical for businesses and result in a best-in-class gross margin of 52.3%
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its rising cash conversion increases its margin of safety
Rollins is trading at $58.04 per share, or 48.2x 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
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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.
