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 industry’s six-month return of 3% has fallen short of the S&P 500’s 5.4% rise.
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. Taking that into account, here are two resilient industrials stocks at the top of our wish list and one we’re steering clear of.
One Industrials Stock to Sell:
L.B. Foster (FSTR)
Market Cap: $250.3 million
Founded with a $2,500 loan, L.B. Foster (NASDAQ: FSTR) is a provider of products and services for the transportation and energy infrastructure sectors, including rail products, construction materials, and coating solutions.
Why Do We Pass on FSTR?
- Annual sales declines of 2.3% for the past five years show its products and services struggled to connect with the market during this cycle
- Low free cash flow margin of 0.4% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- ROIC of 4.7% reflects management’s challenges in identifying attractive investment opportunities
At $23.70 per share, L.B. Foster trades at 5.6x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than FSTR.
Two Industrials Stocks to Watch:
TransDigm (TDG)
Market Cap: $91.04 billion
Supplying parts for nearly all aircraft currently in service, TransDigm (NYSE: TDG) develops and manufactures components and systems for military and commercial aviation.
Why Are We Bullish on TDG?
- Core business can prosper without any help from acquisitions as its organic revenue growth averaged 14.8% over the past two years
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 30.8% outpaced its revenue gains
- Strong free cash flow margin of 19.7% enables it to reinvest or return capital consistently, and its rising cash conversion increases its margin of safety
TransDigm’s stock price of $1,605 implies a valuation ratio of 40.4x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Parsons (PSN)
Market Cap: $8.02 billion
Delivering aerospace technology during the Cold War-era, Parsons (NYSE: PSN) offers engineering, construction, and cybersecurity solutions for the infrastructure and defense sectors.
Why Does PSN Stand Out?
- Market share has increased this cycle as its 23.8% annual revenue growth over the last two years was exceptional
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Returns on capital are increasing as management’s prior bets are starting to bear fruit
Parsons is trading at $74.31 per share, or 20x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
Trump’s April 2024 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 6 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).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
