Over the past six months, Valmont has been a great trade, beating the S&P 500 by 23.7%. It has climbed to $344.42, representing a healthy 37% increase. This performance may have investors wondering how to approach the situation.

We’re glad investors have benefited from the price increase, but we don't have much confidence in Valmont. Here are three reasons why there are better opportunities than VMI and a stock we'd rather own.

Why Is Valmont Not Exciting?

Credited with an invention in the 1950s that improved crop yields, Valmont (NYSE:VMI) provides engineered products and infrastructure services for the agricultural industry.

1. Revenue Tumbling Downwards

Long-term growth is the most important, but within industrials, a stretched historical view may miss new industry trends or demand cycles. Valmont’s recent history marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 1.5% over the last two years.

2. Core Business Falling Behind as Demand Plateaus

We can better understand Building Materials companies by analyzing their organic revenue. This metric gives visibility into Valmont’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.

Over the last two years, Valmont failed to grow its organic revenue. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Valmont might have to lean into acquisitions to accelerate growth, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus).

3. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Sell-side analysts expect Valmont’s revenue to grow by 3.2% over the next 12 months, an improvement versus its 1.5% annual drops for the last two years. While this projection suggests its newer products and services will catalyze better performance, it is still below average for the sector.

Final Judgment

Valmont’s business quality ultimately falls short of our standards. With its shares beating the market recently, the stock trades at 19x forward price-to-earnings (or $344.42 per share). While this valuation could be justified, the upside isn’t great compared to the potential downside. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at The Trade Desk, the nucleus of digital advertising.

Stocks We Would Buy Instead of Valmont

The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market to cap off the year - and we’re zeroing in on the stocks that could benefit immensely.

Take advantage of the rebound 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 (+2,691% between September 2019 and September 2024) as well as under-the-radar businesses like United Rentals (+550% five-year return). Find your next big winner with StockStory today for free.