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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 11.2% over the past six months. This drop was worse than the S&P 500’s 5.6% loss.

The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. Keeping that in mind, 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:

Quest Resource (QRHC)

Market Cap: $45.75 million

Recycling corporate waste to help companies be more sustainable, Quest Resource (NASDAQ:QRHC) is a provider of waste and recycling services.

Why Do We Pass on QRHC?

1. Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years

2. 6.4 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

3. Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

Quest Resource’s stock price of $2.22 implies a valuation ratio of 5.9x forward price-to-earnings. If you’re considering QRHC for your portfolio, see our FREE research report to learn more.

Hub Group (HUBG)

Market Cap: $1.98 billion

Started with $10,000, Hub Group (NASDAQ:HUBG) is a provider of intermodal, truck brokerage, and logistics services, facilitating transportation solutions for businesses worldwide.

Why Should You Sell HUBG?

1. Declining unit sales over the past two years suggest it might have to lower prices to accelerate growth

2. High input costs result in an inferior gross margin of 12.9% that must be offset through higher volumes

3. Earnings per share have dipped by 43.4% annually over the past two years, which is concerning because stock prices follow EPS over the long term

At $35.34 per share, Hub Group trades at 14x forward price-to-earnings. To fully understand why you should be careful with HUBG, check out our full research report (it’s free).

One Industrials Stock to Buy:

Aris Water (ARIS)

Market Cap: $856.7 million

Primarily serving the oil and gas industry, Aris Water (NYSE:ARIS) is a provider of water handling and recycling solutions.

Why Are We Bullish on ARIS?

1. Offerings are difficult to replicate at scale and lead to a best-in-class gross margin of 54.9%

2. Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 24.6% outpaced its revenue gains

3. Free cash flow profile has moved into positive territory over the last five years, indicating the company has passed a significant test