Even if they go mostly unnoticed, industrial businesses are the backbone of our country. 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 5% return lagged the S&P 500 by 8.3 percentage points.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. On that note, here is one industrials stock poised to generate sustainable market-beating returns and two best left ignored.
Two Industrials Stocks to Sell:
Transcat (TRNS)
Market Cap: $789.1 million
Serving the pharmaceutical, industrial manufacturing, energy, and chemical process industries, Transcat (NASDAQ: TRNS) provides measurement instruments and supplies.
Why Are We Hesitant About TRNS?
- Revenue growth over the past two years was nullified by the company’s new share issuances as its earnings per share fell by 15.9% annually
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its decreasing returns suggest its historical profit centers are aging
Transcat is trading at $84.35 per share, or 41.8x forward P/E. If you’re considering TRNS for your portfolio, see our FREE research report to learn more.
RXO (RXO)
Market Cap: $3.21 billion
With access to millions of trucks, RXO (NYSE: RXO) offers full-truckload, less-than-truckload, and last-mile deliveries.
Why Do We Steer Clear of RXO?
- Declining unit sales over the past two years imply it may need to invest in improvements to get back on track
- 5.3 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
RXO’s stock price of $19.48 implies a valuation ratio of 59.4x forward P/E. To fully understand why you should be careful with RXO, check out our full research report (it’s free).
One Industrials Stock to Watch:
RTX (RTX)
Market Cap: $266.4 billion
Originally focused on refrigeration technology, Raytheon (NSYE:RTX) provides a variety of products and services to the aerospace and defense industries.
Why Do We Watch RTX?
- Core business can prosper without any help from acquisitions as its organic revenue growth averaged 10.5% over the past two years
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 16.3% exceeded its revenue gains over the last five years
- Free cash flow margin jumped by 5.2 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
At $197.86 per share, RTX trades at 26.9x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
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 Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
