Whether you see them or not, industrials businesses play a crucial part in our daily activities. But their prominence also brings high exposure to the ups and downs of economic cycles. Luckily, their overall demand was steady over the past six months as the industry’s 16.2% return has closely followed the S&P 500.
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. Taking that into account, here are two industrials stocks we think can generate sustainable market-beating returns and one we’re swiping left on.
Market Cap: $180.8 million
One of the first EV charging companies to go public, Blink Charging (NASDAQ:BLNK) is a manufacturer, owner, operator, and provider of electric vehicle charging equipment and networked EV charging services.
Why Does BLNK Fall Short?
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Sales tumbled by 5.9% annually over the last two years, showing market trends are working against its favor during this cycle
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Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
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Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
Blink Charging’s stock price of $1.56 implies a valuation ratio of 1.4x forward price-to-sales. Check out our free in-depth research report to learn more about why BLNK doesn’t pass our bar.
Market Cap: $35.84 billion
Also known as Wabtec, Westinghouse Air Brake Technologies (NYSE:WAB) provides equipment, systems, and related software for the railway industry.
Why Are We Fans of WAB?
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Operating margin expanded by 6.5 percentage points over the last five years as it scaled and became more efficient
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Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
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WAB is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
At $210.37 per share, Wabtec trades at 21.2x 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.
Market Cap: $24.68 billion
Formed through the split of IT services company SAIC, Leidos (NYSE:LDOS) offers technology and engineering solutions such as military training systems for the defense, civil, and health markets.
Why Are We Positive On LDOS?
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Demand is greater than supply as the company’s 15.2% average backlog growth over the past two years shows it’s securing new contracts and accumulating more orders than it can fulfill
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Share repurchases over the last two years enabled its annual earnings per share growth of 27.6% to outpace its revenue gains
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Free cash flow margin expanded by 3.3 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends