Even if they go mostly unnoticed, industrial businesses are the backbone of our country. Still, their generally high capital requirements expose them to the ups and downs of economic cycles, and the industry’s six-month return of 4.3% has fallen short of the S&P 500’s 7.1% rise.

Investors should tread carefully as timing cyclical companies is a challenging task, and any misstep can have you catching a falling knife. Keeping that in mind, here are three industrials stocks we’re swiping left on.

Carlisle (CSL)

Market Cap: $17.81 billion

Originally founded as Carlisle Tire and Rubber Company, Carlisle Companies (NYSE: CSL) is a multi-industry product manufacturer focusing on construction materials and weatherproofing technologies.

Why Are We Hesitant About CSL?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Estimated sales growth of 4.9% for the next 12 months is soft and implies weaker demand
3. Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 4.8% annually

Carlisle’s stock price of $412.69 implies a valuation ratio of 18.2x forward P/E. Dive into our free research report to see why there are better opportunities than CSL.

Gibraltar (ROCK)

Market Cap: $1.88 billion

Gibraltar (NASDAQ: ROCK) makes renewable energy, agriculture technology and infrastructure products. Its mission statement is to make everyday living more sustainable.

Why Does ROCK Fall Short?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 2.2% annually over the last two years
2. Gross margin of 25.2% reflects its high production costs
3. Free cash flow margin shrank by 2 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

At $63.71 per share, Gibraltar trades at 13.2x forward P/E. If you’re considering ROCK for your portfolio, see our FREE research report to learn more.

Rivian (RIVN)

Market Cap: $15.61 billion

The manufacturer of Amazon’s delivery trucks, Rivian (NASDAQ: RIVN) designs, manufactures, and sells electric vehicles and commercial delivery vans.

Why Does RIVN Worry Us?

1. Negative 52.8% gross margin means it loses money on every sale and must pivot or scale quickly to survive
2. Cash burn makes us question whether it can achieve sustainable long-term growth
3. Short cash runway increases the probability of a capital raise that dilutes existing shareholders

Rivian is trading at $13.04 per share, or 2.7x forward price-to-sales. Read our free research report to see why you should think twice about including RIVN in your portfolio.

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