Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. But they are at the whim of volatile macroeconomic factors that influence capital spending (like interest rates), and the market seems convinced that demand will slow. Due to this bearish outlook, the industry has tumbled by 1.4% over the past six months. This performance was disappointing since the S&P 500 climbed 1.9%.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. With that said, here are two industrials stocks we think can generate sustainable market-beating returns and one best left ignored.
One IndustrialsStock to Sell:
Richardson Electronics (RELL)
Market Cap: $129.6 million
Founded in 1947, Richardson Electronics (NASDAQ: RELL) is a distributor of power grid and microwave tubes as well as consumables related to those products.
Why Do We Steer Clear of RELL?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 12.3% annually over the last two years
- Earnings per share have dipped by 74.7% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Richardson Electronics’s stock price of $8.99 implies a valuation ratio of 12.9x forward P/E. Check out our free in-depth research report to learn more about why RELL doesn’t pass our bar.
Two Industrials Stocks to Buy:
Aris Water (ARIS)
Market Cap: $833.3 million
Primarily serving the oil and gas industry, Aris Water (NYSE: ARIS) is a provider of water handling and recycling solutions.
Why Will ARIS Beat the Market?
- Market share has increased this cycle as its 15.1% annual revenue growth over the last two years was exceptional
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 35% outpaced its revenue gains
- Free cash flow margin is now positive, indicating the company has achieved financial self-sustainability
Aris Water is trading at $25.53 per share, or 17.3x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
AAON (AAON)
Market Cap: $5.84 billion
Backed by two million square feet of lab testing space, AAON (NASDAQ: AAON) makes heating, ventilation, and air conditioning equipment for different types of buildings.
Why Should You Buy AAON?
- Annual revenue growth of 20.7% over the past five years was outstanding, reflecting market share gains this cycle
- Earnings growth has trumped its peers over the last five years as its EPS has compounded at 18.2% annually
- ROIC punches in at 20.7%, illustrating management’s expertise in identifying profitable investments
At $71.48 per share, AAON trades at 29.7x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
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