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1 Industrials Stock with Impressive Fundamentals and 2 We Turn Down
Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. Still, their generally high capital requirements expose them to the ups and downs of economic cycles, and the market seems to be baking in a prolonged downturn as the industry has shed 2.6% over the past six months. This performance is a noticeable divergence from the S&P 500’s 15.2% return.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. Taking that into account, here is one industrials stock poised to generate sustainable market-beating returns and two we would avoid.
Two Industrials Stocks to Sell:
WESCO (WCC)
Market Cap: $17.84 billion
Based in Pittsburgh, WESCO (NYSE:WCC) provides electrical, industrial, and communications products and augments them with services such as supply chain management.
Why Are We Wary of WCC?
- Annual sales growth of 6.8% over the last two years lagged behind its industrials peers as its large revenue base made it difficult to generate incremental demand
- Gross margin of 21.5% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 1.5% for the last five years
WESCO is trading at $363.50 per share, or 21.1x forward P/E. If you’re considering WCC for your portfolio, see our FREE research report to learn more.
EVgo (EVGO)
Market Cap: $182.8 million
Created through a settlement between NRG Energy and the California Public Utilities Commission, EVgo (NASDAQ:EVGO) is a provider of electric vehicle charging solutions, operating fast charging stations across the United States.
Why Does EVGO Give Us Pause?
- Poor expense management has led to operating margin losses
- Negative free cash flow raises questions about the return timeline for its investments
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
EVgo’s stock price of $1.30 implies a valuation ratio of 0.4x forward price-to-sales. Dive into our free research report to see why there are better opportunities than EVGO.
One Industrials Stock to Buy:
Allison Transmission (ALSN)
Market Cap: $9.15 billion
Helping build race cars at one point, Allison Transmission (NYSE:ALSN) offers transmissions to original equipment manufacturers and fleet operators.
Why Is ALSN a Good Business?
- Market share has increased this cycle as its 18.9% annual revenue growth over the last two years was exceptional
- Share buybacks catapulted its annual earnings per share growth to 17.7%, which outperformed its revenue gains over the last five years
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
At $110.57 per share, Allison Transmission trades at 10.5x forward P/E. Is now the time to initiate a position? Find out in our full 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 Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.