Over the past six months, Gates Industrial Corporation’s shares (currently trading at $22.09) have posted a disappointing 11% loss while the S&P 500 was down 3.2%. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.
Is there a buying opportunity in Gates Industrial Corporation, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Gates Industrial Corporation Not Exciting?
Even though the stock has become cheaper, we're swiping left on Gates Industrial Corporation for now. Here are three reasons there are better opportunities than GTES and a stock we'd rather own.
1. Core Business Falling Behind as Demand Declines
In addition to reported revenue, organic revenue is a useful data point for analyzing Engineered Components and Systems companies. This metric gives visibility into Gates Industrial Corporation’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Gates Industrial Corporation’s organic revenue averaged 1.4% year-on-year declines. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Gates Industrial Corporation might have to lean into acquisitions to grow, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus). 
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Gates Industrial Corporation’s revenue to rise by 3.8%. Although this projection implies its newer products and services will catalyze better top-line performance, it is still below the sector average.
3. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Gates Industrial Corporation historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 7.1%, somewhat low compared to the best industrials companies that consistently pump out 20%+.
Final Judgment
Gates Industrial Corporation isn’t a terrible business, but it doesn’t pass our quality test. Following the recent decline, the stock trades at 14.1× forward P/E (or $22.09 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are more exciting stocks to buy at the moment. Let us point you toward one of our all-time favorite software stocks.
Stocks We Would Buy Instead of Gates Industrial Corporation
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren't just high-quality businesses. Something is happening with them right now. Elite fundamentals meeting near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week's Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
