Even if they go mostly unnoticed, industrial businesses are the backbone of our country. Still, their generally high capital requirements expose them to the ups and downs of economic cycles, and the industry’s six-month return of 4.9% has fallen short of the S&P 500’s 18% rise.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. On that note, here is one resilient industrials stock at the top of our wish list and two we’re passing on.
Two Industrials Stocks to Sell:
Illinois Tool Works (ITW)
Market Cap: $77.03 billion
Founded by Byron Smith, an investor who held over 100 patents, Illinois Tool Works (NYSE:ITW) manufactures engineered components and specialized equipment for numerous industries.
Why Does ITW Worry Us?
- 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
- Projected sales growth of 4.1% for the next 12 months suggests sluggish demand
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 4% annually
Illinois Tool Works is trading at $270.06 per share, or 22.8x forward P/E. Check out our free in-depth research report to learn more about why ITW doesn’t pass our bar.
Tesla (TSLA)
Market Cap: $1.50 trillion
Originally founded by Martin Eberhard and Marc Tarpenning in 2003, Tesla (NASDAQ:TSLA) is an electric vehicle company accelerating the world’s transition to sustainable energy.
Why Are We Out on TSLA?
- Tesla’s scale advantage in EV production leads to gross margins that exceed incumbents such as General Motors and Ford. However, a softer macroeconomic backdrop and tariff pressures have weighed on automobile sales, which are highly cyclical.
- The company’s execution ability is a question mark given its long history of delays, such as the Cybertruck and Robotaxi launches. Its sizeable investments in projects with uncertain return timelines, like Optimus, also raise skepticism from investors.
- On the bright side, Tesla’s Megapack product solves a critical problem for utilities needing renewable energy storage solutions. This innovation has made the energy segment the most profitable and fastest-growing business line for the company.
At $379.09 per share, Tesla trades at 194x forward price-to-earnings. Read our free research report to see why you should think twice about including TSLA in your portfolio.
One Industrials Stock to Buy:
Northwest Pipe (NWPX)
Market Cap: $995.8 million
Playing a large role in the Integrated Pipeline (IPL) project in Texas to deliver ~350 million gallons of water per day, Northwest Pipe (NASDAQ:NWPX) is a manufacturer of pipeline systems for water infrastructure.
Why Should You Buy NWPX?
- Impressive 14.4% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Free cash flow margin expanded by 18.1 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
Northwest Pipe’s stock price of $103.24 implies a valuation ratio of 20x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.