Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages. Just because a business is in the green today doesn’t mean it will thrive tomorrow.
A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. That said, here is one profitable company that leverages its financial strength to beat the competition and two that may struggle to keep up.
Two Industrials Stocks to Sell:
EnerSys (ENS)
Trailing 12-Month GAAP Operating Margin: 12.1%
Supplying batteries that power equipment as big as mining rigs, EnerSys (NYSE: ENS) manufactures various kinds of batteries for a range of industries.
Why Are We Hesitant About ENS?
- Declining unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
- Anticipated sales growth of 1.6% for the next year implies demand will be shaky
- Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 26.1%
EnerSys’s stock price of $144.47 implies a valuation ratio of 12.6x forward P/E. If you’re considering ENS for your portfolio, see our FREE research report to learn more.
Gates Industrial Corporation (GTES)
Trailing 12-Month GAAP Operating Margin: 13.7%
Helping create one of the most memorable moments for the iconic “Jurassic Park” film, Gates (NYSE: GTES) offers power transmission and fluid transfer equipment for various industries.
Why Are We Cautious About GTES?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Estimated sales growth of 3.6% for the next 12 months is soft and implies weaker demand
- ROIC of 7% reflects management’s challenges in identifying attractive investment opportunities
Gates Industrial Corporation is trading at $21.44 per share, or 13.9x forward P/E. Read our free research report to see why you should think twice about including GTES in your portfolio.
One Industrials Stock to Buy:
Armstrong World (AWI)
Trailing 12-Month GAAP Operating Margin: 26.3%
Started as a two-man shop dating back to the 1860s, Armstrong (NYSE: AWI) provides ceiling and wall products to commercial and residential spaces.
Why Are We Backing AWI?
- Annual revenue growth of 11.5% over the last two years was superb and indicates its market share increased during this cycle
- Excellent operating margin of 24.7% highlights the efficiency of its business model, and its operating leverage amplified its profits over the last five years
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 18.7% exceeded its revenue gains over the last two years
At $185.98 per share, Armstrong World trades at 22.5x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
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