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 17.2% gain over the past six months, beating the S&P 500 by 9.4 percentage points.
Although these companies have produced results lately, a cautious approach is imperative. When the cycle naturally turns, the losers can be left for dead while the winners consolidate and take more of the market. Taking that into account, here is one industrials stock poised to generate sustainable market-beating returns and two we’re passing on.
Two Industrials Stocks to Sell:
Covenant Logistics (CVLG)
Market Cap: $1.17 billion
Started with 25 trucks and 50 trailers, Covenant Logistics (NASDAQ: CVLG) is a provider of expedited long haul freight services, offering a range of logistics solutions.
Why Is CVLG Risky?
- Sales trends were unexciting over the last two years as its 3.8% annual growth was below the typical industrials company
- Incremental sales over the last two years were much less profitable as its earnings per share fell by 15.7% annually while its revenue grew
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Covenant Logistics is trading at $43.08 per share, or 0.9x forward price-to-sales. To fully understand why you should be careful with CVLG, check out our full research report (it’s free).
Whirlpool (WHR)
Market Cap: $2.75 billion
Credited with introducing the first automatic washing machine, Whirlpool (NYSE: WHR) is a manufacturer of a variety of home appliances.
Why Do We Steer Clear of WHR?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 5.8% annually over the last five years
- Free cash flow margin shrank by 5.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- High net-debt-to-EBITDA ratio of 7× could force the company to raise capital on unfavorable terms if market conditions deteriorate
Whirlpool’s stock price of $36.52 implies a valuation ratio of 10x forward P/E. If you’re considering WHR for your portfolio, see our FREE research report to learn more.
One Industrials Stock to Buy:
Gorman-Rupp (GRC)
Market Cap: $2.19 billion
Powering fluid dynamics since 1934, Gorman-Rupp (NYSE: GRC) has evolved from its Ohio origins into a global manufacturer and seller of pumps and pump systems.
Why Is GRC a Top Pick?
- Annual revenue growth of 14.9% over the last five years was superb and indicates its market share increased during this cycle
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 30% over the last two years outstripped its revenue performance
- Free cash flow margin expanded by 6.2 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
At $86.65 per share, Gorman-Rupp trades at 33.5x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
