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Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. But they are at the whim of volatile macroeconomic factors that influence capital spending (like interest rates), and the market seems convinced that demand will slow. Due to this bearish outlook, the industry has tumbled by 18.6% over the past six months. This drop was worse than the S&P 500’s 11% loss.

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 resilient industrials stock at the top of our wish list and two we’re swiping left on.

Two Industrials Stocks to Sell:

ChargePoint (CHPT)

Market Cap: $264.2 million

The most prominent EV charging company during the COVID bull market, ChargePoint (NYSE:CHPT) is a provider of electric vehicle charging technology solutions in North America and Europe.

Why Does CHPT Give Us Pause?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 5.6% annually over the last two years

2. Negative free cash flow raises questions about the return timeline for its investments

3. Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution

At $0.58 per share, ChargePoint trades at 0.6x forward price-to-sales. Read our free research report to see why you should think twice about including CHPT in your portfolio, it’s free.

Hillenbrand (HI)

Market Cap: $1.41 billion

Hillenbrand, Inc. (NYSE: HI) is an industrial company that designs, manufactures, and sells highly engineered processing equipment and solutions for various industries.

Why Is HI Risky?

1. Incremental sales over the last two years were much less profitable as its earnings per share fell by 7% annually while its revenue grew

2. Free cash flow margin shrank by 8.6 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

3. Waning returns on capital imply its previous profit engines are losing steam

Hillenbrand’s stock price of $19.99 implies a valuation ratio of 6.5x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than HI.

One Industrials Stock to Buy:

EMCOR (EME)

Market Cap: $15.55 billion

Through its network of over 70 subsidiaries, EMCOR (NYSE:EME) provides electrical, mechanical, and building construction and services

Why Will EME Beat the Market?

1. Annual revenue growth of 14.7% over the past two years was outstanding, reflecting market share gains this cycle

2. Share repurchases have amplified shareholder returns as its annual earnings per share growth of 62.4% exceeded its revenue gains over the last two years

3. Improving returns on capital reflect management’s ability to monetize investments