Whether you see them or not, industrials businesses play a crucial part in our daily activities. Still, their generally high capital requirements expose them to the ups and downs of economic cycles, and the market seems confused about where we could go next. This uncertainty has led to a flat return for the industry over the past six months while the S&P 500 was up 16.9%.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. With that said, here are two industrials stocks we think can generate sustainable market-beating returns and one that may face trouble.
One Industrials Stock to Sell:
SiteOne (SITE)
Market Cap: $4.02 billion
Known for distributing John Deere tractors and LESCO turf care products, SiteOne Landscape Supply (NYSE:SITE) provides landscaping products and services to professionals, including irrigation, lighting, and nursery supplies.
Why Are We Out on SITE?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Earnings per share were flat over the last five years and fell short of the peer group average
- Waning returns on capital imply its previous profit engines are losing steam
SiteOne’s stock price of $92.19 implies a valuation ratio of 19.9x forward P/E. Check out our free in-depth research report to learn more about why SITE doesn’t pass our bar.
Two Industrials Stocks to Watch:
Core & Main (CNM)
Market Cap: $7.67 billion
Formerly a division of industrial distributor HD Supply, Core & Main (NYSE:CNM) is a provider of water, wastewater, and fire protection products and services.
Why Are We Positive on CNM?
- Annual revenue growth of 12.9% over the last five years was superb and indicates its market share increased during this cycle
- Share repurchases over the last two years enabled its annual earnings per share growth of 15.8% to outpace its revenue gains
- Free cash flow margin grew by 8.5 percentage points over the last five years, giving the company more chips to play with
At $41.99 per share, Core & Main trades at 13.5x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.
ESCO (ESE)
Market Cap: $6.95 billion
A developer of the communication systems used in the Batmobile of “The Dark Knight,” ESCO (NYSE:ESE) is a provider of engineered components for the aerospace, defense, and utility sectors.
Why Are We Bullish on ESE?
- Market share has increased this cycle as its 15.1% annual revenue growth over the last two years was exceptional
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 42.6% annually, topping its revenue gains
- Free cash flow margin expanded by 9.3 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
ESCO is trading at $268.47 per share, or 29.8x 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
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.