Whether you see them or not, industrials businesses play a crucial part in our daily activities. But their prominence also brings high exposure to the ups and downs of economic cycles. Luckily, their overall demand was steady over the past six months as the industry’s 6.7% return has closely followed the S&P 500.
Regardless of these results, investors should tread carefully. The diversity of companies in this space means that not all are created equal or well-positioned for the inescapable downturn. With that said, here is one resilient industrials stock at the top of our wish list and two that may face trouble.
Two Industrials Stocks to Sell:
Plug Power (PLUG)
Market Cap: $3.05 billion
Powering forklifts for Walmart’s distribution centers, Plug Power (NASDAQ: PLUG) provides hydrogen fuel cells used to power electric motors.
Why Are We Cautious About PLUG?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 3.9% annually over the last two years
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Plug Power’s stock price of $2.19 implies a valuation ratio of 3.7x forward price-to-sales. Check out our free in-depth research report to learn more about why PLUG doesn’t pass our bar.
Methode Electronics (MEI)
Market Cap: $568.6 million
Founded in 1946, Methode Electronics (NYSE: MEI) is a global supplier of custom-engineered solutions for Original Equipment Manufacturers (OEMs).
Why Should You Sell MEI?
- Sales tumbled by 1.3% annually over the last five years, showing market trends are working against it during this cycle
- Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Methode Electronics is trading at $16.05 per share, or 11.3x forward EV-to-EBITDA. To fully understand why you should be careful with MEI, check out our full research report (it’s free).
One Industrials Stock to Watch:
Allegion (ALLE)
Market Cap: $13.14 billion
Allegion plc (NYSE: ALLE) is a provider of security products and solutions that keep people and assets safe and secure in various environments.
Why Are We Positive on ALLE?
- Excellent operating margin of 19.8% highlights the efficiency of its business model, and it turbocharged its profits by achieving some fixed cost leverage
- Free cash flow margin expanded by 6.1 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures
At $157.40 per share, Allegion trades at 15x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
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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-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
