Whether you see them or not, industrials businesses play a crucial part in our daily activities. Still, their generally high capital requirements expose them to the ups and downs of economic cycles, and the industry’s six-month return of 3.8% has fallen short of the S&P 500’s 16.2% rise.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. Taking that into account, here is one industrials stock poised to generate sustainable market-beating returns and two we would avoid.
One Industrials Stocks to Sell:
Advanced Drainage (WMS)
Market Cap: $9.57 billion
Originally started as a farm water drainage company, Advanced Drainage Systems (NYSE:WMS) provides clean water management solutions to communities across America.
Why Does WMS Give Us Pause?
- Muted 5.2% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
- Earnings per share lagged its peers over the last two years as they only grew by 2.4% annually
- Eroding returns on capital suggest its historical profit centers are aging
Advanced Drainage is trading at $127.04 per share, or 19.5x forward P/E. To fully understand why you should be careful with WMS, check out our full research report (it’s free).
Albany (AIN)
Market Cap: $1.68 billion
Founded in 1895, Albany (NYSE:AIN) is a global textiles and materials processing company, specializing in machine clothing for paper mills and engineered composite structures for aerospace and other industries.
Why Do We Avoid AIN?
- Annual sales declines of 1.1% for the past two years show its products and services struggled to connect with the market during this cycle
- Earnings per share fell by 5.7% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $59.30 per share, Albany trades at 1.4x trailing 12-month price-to-sales. Check out our free in-depth research report to learn more about why AIN doesn’t pass our bar.
One Industrials Stock to Watch:
Parker-Hannifin (PH)
Market Cap: $120.8 billion
Founded in 1917, Parker Hannifin (NYSE:PH) is a manufacturer of motion and control systems for a wide variety of mobile, industrial and aerospace markets.
Why Is PH Interesting?
- Excellent operating margin of 19.1% highlights the efficiency of its business model, and its rise over the last five years was fueled by some leverage on its fixed costs
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- PH is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its growing cash flow gives it even more resources to deploy
Parker-Hannifin’s stock price of $956.89 implies a valuation ratio of 26.7x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.