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1 Industrials Stock with Exciting Potential and 2 We Brush Off
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 8.1% has fallen short of the S&P 500’s 11.4% rise.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. Taking that into account, here is one resilient industrials stock at the top of our wish list and two best left ignored.
Two Industrials Stocks to Sell:
Graco (GGG)
Market Cap: $12.64 billion
Founded in 1926, Graco (NYSE:GGG) is an industrial company specializing in the development and manufacturing of fluid-handling systems and products.
Why Do We Think Twice About GGG?
- Annual revenue growth of 2.1% over the last two years was below our standards for the industrials sector
- Earnings per share were flat over the last two years and fell short of the peer group average
- Diminishing returns on capital suggest its earlier profit pools are drying up
Graco is trading at $75.78 per share, or 23.1x forward P/E. Dive into our free research report to see why there are better opportunities than GGG.
XPO (XPO)
Market Cap: $25.75 billion
Owning a mobile game simulating freight operations for the Tour de France, XPO (NYSE:XPO) is a transportation company specializing in expedited shipping services.
Why Does XPO Fall Short?
- Sales trends were unexciting over the last two years as its 2.8% annual growth was below the typical industrials company
- Gross margin of 19.8% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Low free cash flow margin of 1.8% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
XPO’s stock price of $225.16 implies a valuation ratio of 40.2x forward P/E. To fully understand why you should be careful with XPO, check out our full research report (it’s free).
One Industrials Stock to Watch:
Champion Homes (SKY)
Market Cap: $4.72 billion
Founded in 1951, Champion Homes (NYSE:SKY) is a manufacturer of modular homes and buildings in North America.
Why Are We Positive on SKY?
- Market share has increased this cycle as its 14.7% annual revenue growth over the last two years was exceptional
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- ROIC punches in at 37.9%, illustrating management’s expertise in identifying profitable investments
At $86.02 per share, Champion Homes trades at 24.7x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
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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-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.