Whether you see them or not, industrials businesses play a crucial part in our daily activities. But they are at the whim of volatile macroeconomic factors that influence capital spending (like interest rates), and the industry has underperformed the market over the past six months as its 2.8% return lagged the S&P 500 by 5.3 percentage points.
Investors should tread carefully as timing cyclical companies is a challenging task, and any misstep can have you catching a falling knife. Taking that into account, here are three industrials stocks that may face trouble.
Concrete Pumping (BBCP)
Market Cap: $346.6 million
Going public via SPAC in 2018, Concrete Pumping (NASDAQ:BBCP) is a provider of concrete pumping and waste management services in the United States and the United Kingdom.
Why Is BBCP Not Exciting?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Demand will likely fall over the next 12 months as Wall Street expects flat revenue
- Earnings per share have contracted by 16.4% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
Concrete Pumping’s stock price of $6.54 implies a valuation ratio of 12.4x forward price-to-earnings. Check out our free in-depth research report to learn more about why BBCP doesn’t pass our bar.
Columbus McKinnon (CMCO)
Market Cap: $498.7 million
With 19 different brands across the globe, Columbus McKinnon (NASDAQ:CMCO) offers material handling equipment for the construction, manufacturing, and transportation industries.
Why Do We Think CMCO Will Underperform?
- Sales trends were unexciting over the last two years as its 2.4% annual growth was below the typical industrials company
- Earnings per share fell by 1.8% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Free cash flow margin shrank by 12.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Columbus McKinnon is trading at $17.43 per share, or 5.4x forward price-to-earnings. If you’re considering CMCO for your portfolio, see our FREE research report to learn more.
Proto Labs (PRLB)
Market Cap: $966.4 million
Pioneering the concept of online quoting and manufacturing for custom prototypes and low-volume production parts, Proto Labs (NYSE:PRLB) offers injection molding, 3D printing, and sheet metal fabrication for manufacturers in various industries.
Why Do We Steer Clear of PRLB?
- Sales trends were unexciting over the last two years as its 1.3% annual growth was below the typical industrials company
- Efficiency has decreased over the last five years as its operating margin fell by 9.8 percentage points
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 10.1% annually while its revenue grew
At $40.33 per share, Proto Labs trades at 26.5x forward price-to-earnings. Read our free research report to see why you should think twice about including PRLB in your portfolio.
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