The Backbone of Our Country: Industrials Stocks in the Time of Uncertainty
As we navigate the ups and downs of economic cycles, it is essential to focus on industrial businesses that form the backbone of our country. With high capital requirements, these companies are often exposed to market fluctuations, with some experiencing a prolonged downturn in recent months. The industrial sector as a whole has shed 11.3% over the past six months, outpacing the S&P 500’s 5.7% loss.
At StockStory, we aim to help investors discover companies that can thrive under any circumstance. We will highlight two industrials stocks boasting durable advantages and one stock that may face challenges in this environment.
One Industrials Stock to Sell: L.B. Foster (FSTR)
L.B. Foster is a provider of products and services for the transportation and energy infrastructure sectors, including rail products, construction materials, and coating solutions. Founded with a mere $2,500 loan, the company has grown significantly over the years.
However, sales at L.B. Foster have been trending downward by 1.5% annually over the last five years, indicating that market forces are not in its favor during this cycle. The poor free cash flow margin of 0.8% for the last five years limits its ability to invest in growth initiatives, execute share buybacks, or pay dividends.
Moreover, the underwhelming return on capital (ROC) of 4.9% reflects management’s difficulties in finding profitable growth opportunities. L.B. Foster is trading at $19.91 per share, with a forward EV-to-EBITDA multiple of 4.8x.
To fully understand why we recommend exercising caution with FSTR, please refer to our comprehensive research report (available free of charge).
Two Industrials Stocks to Watch: Primoris and SmartRent
Primoris (PRIM)
With a market cap of $3.20 billion, Primoris is an industry leader in building, maintaining, and upgrading infrastructure for the utility, energy, and civil construction sectors. Listed on the NASDAQ in 2008, Primoris has been steadily growing its business.
We are fans of PRIM due to several reasons:
- Annual revenue growth of 20% over the past two years reflects market share gains during this cycle.
- Earnings per share have grown by 23.2% annually over the last two years and outrank its peers.
- The return on invested capital (ROIC) stands at an impressive 10.3%, demonstrating management’s competence in investing resources efficiently.
At $57.11 per share, Primoris trades at a forward price-to-earnings ratio of 14.9x. Whether now is the right time to invest will depend on various factors. See our in-depth research report (available free) for more information.
SmartRent (SMRT)
With a market cap of $171.3 million, SmartRent provides smart home devices and software for multifamily residential properties, single-family rental homes, and student housing communities. Founded by an employee at a real estate rental company, SmartRent has leveraged its connections to gain significant traction.
Our reasons for liking SMRT include:
- Annual revenue growth of 35.1% over the past four years is outstanding, reflecting market share gains during this cycle.
- Ability to secure long-term commitments with customers is evident in its 41.5% average annual recurring revenue (ARR) growth over the past two years.
- Incremental sales have been highly profitable as earnings per share increased by 52.1% annually, surpassing revenue gains.
SmartRent’s stock price of $0.91 implies a valuation ratio of 1.1x forward price-to-sales. Whether now is a good time to buy also depends on individual circumstances. Find out more in our comprehensive research report (available free).
We Like Even More Companies That Are Resilient to Market Fluctuations
As we enter the new year under growing uncertainty, several factors contribute to the market’s current state:
- Although the crowd is speculating about new economic policies for 2025, questions related to this topic are driving much of the current uncertainty.
- Companies thriving in such environments have significant growth potential.
We’ve curated a list of Top 5 Growth Stocks that will be our "High Quality" stocks for this month, with these stocks generating a market-beating return of 175% over the last five years. Past winners include familiar names like Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return).
Find your next big winner today without any cost with StockStory.
Let’s dive deeper into the list of these top stocks:
- Our in-depth analysis provides an inside look at stocks with exceptional growth potential for this month.
- With a proven track record of delivering high returns, each stock has shown impressive results over various periods.
This curated selection highlights key market winners:
- Our detailed research will help investors pick the best investments in today’s climate.
Investors and researchers are using tools such as our analysis model to make informed decisions with this free resource.
Visit us at Stockstory or visit their website directly to access valuable resources and information.
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