Even if they go mostly unnoticed, industrial businesses are the backbone of our country. They are also bound to benefit from a friendlier regulatory environment with the Trump administration, and this excitement has led to a six-month gain of 23.5% for the sector - higher than the S&P 500’s 17.5% return.

Regardless of these results, investors should tread carefully. The diversity of companies in this space means that not all are created equal or well-positioned for the inescapable downturn. Taking that into account, here is one resilient industrials stock at the top of our wish list and two we’re passing on.

Two Industrials Stocks to Sell:

Alta (ALTG)

Market Cap: $229.1 million

Founded in 1984, Alta Equipment Group (NYSE: ALTG) is a provider of industrial and construction equipment and services across the Midwest and Northeast United States.

Why Do We Avoid ALTG?

1. 3.7% annual revenue growth over the last two years was slower than its industrials peers
2. Cash-burning history makes us doubt the long-term viability of its business model
3. High net-debt-to-EBITDA ratio of 5× could force the company to raise capital at unfavorable terms if market conditions deteriorate

At $7.15 per share, Alta trades at 1.3x forward EV-to-EBITDA. If you’re considering ALTG for your portfolio, see our FREE research report to learn more.

Stanley Black & Decker (SWK)

Market Cap: $12.1 billion

With an iconic “STANLEY” logo which has remained virtually unchanged for over a century, Stanley Black & Decker (NYSE: SWK) is a manufacturer primarily catering to the tool and outdoor equipment industry.

Why Do We Think SWK Will Underperform?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Earnings per share fell by 8.6% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
3. 10.5 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

Stanley Black & Decker is trading at $78.18 per share, or 13.7x forward P/E. Dive into our free research report to see why there are better opportunities than SWK.

One Industrials Stock to Watch:

Itron (ITRI)

Market Cap: $5.39 billion

Founded by a small group of engineers who wanted to build a more efficient way to read utility meters, Itron (NASDAQ: ITRI) offers energy and water management products for the utility industry, municipalities, and industrial customers.

Why Do We Like ITRI?

1. Operating margin improved by 10.3 percentage points over the last five years as it eliminated redundant costs
2. Incremental sales significantly boosted profitability as its annual earnings per share growth of 74.4% over the last two years outstripped its revenue performance
3. Historical investments are beginning to pay off as its returns on capital are growing

Itron’s stock price of $117.75 implies a valuation ratio of 21.6x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.

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