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华尔街日报2 Industrials Stocks to Research Further and 1 We Ignore
Whether you see them or not, industrials businesses play a crucial part in our daily activities. Their momentum is also rising as lower interest rates have incentivized higher capital spending. As a result, the industry has posted a 17.3% gain over the past six months, beating the S&P 500 by 4.2 percentage points.
Nevertheless, investors must be mindful as the cycle can unexpectedly turn. When this inevitably happens, only the elite companies will survive and ultimately thrive. Keeping that in mind, here are two resilient industrials stocks at the top of our wish list and one that may face trouble.
One Industrials Stock to Sell:
Taylor Morrison Home (TMHC)
Market Cap: $6.08 billion
Named “America’s Most Trusted Home Builder” in 2019, Taylor Morrison Home (NYSE:TMHC) builds single family homes and communities across the United States.
Why Are We Wary of TMHC?
- Demand cratered as it couldn’t win new orders over the past two years, leading to an average 14.5% decline in its backlog
- Sales are projected to tank by 13.6% over the next 12 months as demand evaporates
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 2.6% annually
Taylor Morrison Home is trading at $62.20 per share, or 9.8x forward P/E. Check out our free in-depth research report to learn more about why TMHC doesn’t pass our bar.
Two Industrials Stocks to Watch:
Acuity Brands (AYI)
Market Cap: $10.98 billion
One of the pioneers of smart lights, Acuity (NYSE:AYI) designs and manufactures light fixtures and building management systems used in various industries.
Why Does AYI Stand Out?
- Offerings are difficult to replicate at scale and result in a premier gross margin of 44.5%
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 16.9% exceeded its revenue gains over the last five years
- Industry-leading 16.6% return on capital demonstrates management’s skill in finding high-return investments
Acuity Brands’s stock price of $361.07 implies a valuation ratio of 18.3x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
American Superconductor (AMSC)
Market Cap: $1.42 billion
Founded in 1987, American Superconductor (NASDAQ:AMSC) has shifted from superconductor research to developing power systems, adapting to changing energy grid needs and naval technology requirements.
Why Should You Buy AMSC?
- Market share has increased this cycle as its 49% annual revenue growth over the last two years was exceptional
- Free cash flow turned positive over the last five years, indicating the company has passed a significant test
- Rising returns on capital show the company is starting to reap the benefits of its past investments
At $31.28 per share, American Superconductor trades at 36.3x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
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