Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. 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 22% for the sector - higher than the S&P 500’s 10.3% 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. On that note, here are three industrials stocks best left ignored.
Concrete Pumping (BBCP)
Market Cap: $399.5 million
Going public via SPAC in 2018, Concrete Pumping (NASDAQ:BBCP) is a provider of concrete pumping and waste management services in the United States and the United Kingdom.
Why Are We Wary of BBCP?
- Annual sales declines of 5.7% for the past two years show its products and services struggled to connect with the market during this cycle
- Earnings per share have dipped by 47.7% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
Concrete Pumping is trading at $7.90 per share, or 52.5x forward P/E. Read our free research report to see why you should think twice about including BBCP in your portfolio.
American Woodmark (AMWD)
Market Cap: $700.7 million
Starting as a small millwork shop, American Woodmark (NASDAQ:AMWD) is a cabinet manufacturing company that helps customers from inspiration to installation.
Why Do We Steer Clear of AMWD?
- Annual sales declines of 1.8% for the past five years show its products and services struggled to connect with the market during this cycle
- Sales are projected to tank by 8.9% over the next 12 months as its demand continues evaporating
- Earnings per share have contracted by 9.9% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
American Woodmark’s stock price of $48.50 implies a valuation ratio of 32.5x forward P/E. Dive into our free research report to see why there are better opportunities than AMWD.
Proto Labs (PRLB)
Market Cap: $1.78 billion
Pioneering the concept of online quoting and manufacturing for custom prototypes and low-volume production parts, Proto Labs (NYSE:PRLB) offers injection molding, 3D printing, and sheet metal fabrication for manufacturers in various industries.
Why Should You Sell PRLB?
- Muted 3.9% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
- Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term
- ROIC of -0.9% reflects management’s challenges in identifying attractive investment opportunities
At $74.79 per share, Proto Labs trades at 37x forward P/E. Check out our free in-depth research report to learn more about why PRLB doesn’t pass our bar.
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