Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. Their momentum is also rising as lower interest rates have incentivized higher capital spending, and as a result, the industry has posted a six-month gain of 3.9%. This was a good place to be as the S&P 500 was down 2.1%.
Nevertheless, investors must be mindful as the cycle can unexpectedly turn. When this inevitably happens, only the elite companies will survive and ultimately thrive. With that said, here are three industrials stocks boasting durable advantages.
Xylem (XYL)
Market Cap: $29.48 billion
Formed through a spinoff, Xylem (NYSE: XYL) manufactures and services engineered products across a wide variety of applications primarily in the water sector.
Why Could XYL Be a Winner?
- Annual revenue growth of 13.1% over the last five years was superb and indicates its market share increased during this cycle
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 19.8% over the last five years outstripped its revenue performance
- Free cash flow margin expanded by 3.7 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
At $120.36 per share, Xylem trades at 22.3x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Thermon (THR)
Market Cap: $1.71 billion
Creating the first packaged tracing systems, Thermon (NYSE: THR) is a leading provider of engineered industrial process heating solutions for process industries.
Why Do We Like THR?
- Market share has increased this cycle as its 12.4% annual revenue growth over the last five years was exceptional
- Operating margin expanded by 8.8 percentage points over the last five years as it scaled and became more efficient
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 46.1% over the last five years outstripped its revenue performance
Thermon is trading at $52.09 per share, or 23.8x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Granite Construction (GVA)
Market Cap: $5.29 billion
Having played a role in the construction of the Hoover Dam, Granite Construction (NYSE: GVA) is a provider of infrastructure solutions for roads, bridges, and other projects.
Why Are We Positive On GVA?
- Annual revenue growth of 12.3% over the past two years was outstanding, reflecting market share gains this cycle
- Additional sales over the last two years increased its profitability as the 38.9% annual growth in its earnings per share outpaced its revenue
- Free cash flow margin expanded by 9.6 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
Granite Construction’s stock price of $121.52 implies a valuation ratio of 20x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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