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Whether you see them or not, industrials businesses play a crucial part in our daily activities. Unfortunately, this role also comes with a demand profile tethered to the ebbs and flows of the broader economy, and investors seem to be forecasting a downturn - over the past six months, the industry has pulled back by 12.1%. This drawdown was worse than the S&P 500’s 5.2% fall.

Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. With that said, 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:

Winnebago (WGO)

Market Cap: $917.6 million

Created to provide high-quality, affordable RVs to the post-war American family, Winnebago (NYSE:WGO) is a manufacturer of recreational vehicles, providing a range of motorhomes, travel trailers, and fifth-wheel products for outdoor and adventure lifestyles.

Why Is WGO Risky?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 21.4% annually over the last two years

2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 15.2% annually

3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

At $32.74 per share, Winnebago trades at 7.5x forward price-to-earnings. If you’re considering WGO for your portfolio, see our FREE research report to learn more.

Timken (TKR)

Market Cap: $4.56 billion

Established after the founder noticed the difficulty freight wagons had making sharp turns, Timken (NYSE:TKR) is a provider of industrial parts used across various sectors.

Why Should You Dump TKR?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion

2. Sales over the last two years were less profitable as its earnings per share fell by 2.9% annually while its revenue was flat

3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 6.3 percentage points

Timken’s stock price of $64.95 implies a valuation ratio of 10.2x forward price-to-earnings. Check out our free in-depth research report to learn more about why TKR doesn’t pass our bar.

One Industrials Stock to Watch:

Waste Management (WM)

Market Cap: $91.86 billion

Headquartered in Houston, Waste Management (NYSE:WM) is a provider of comprehensive waste management services in North America.

Why Is WM Interesting?

1. Market share is on track to rise over the next 12 months as its 16% projected revenue growth implies demand will accelerate from its two-year trend

2. Disciplined cost controls and effective management resulted in a strong long-term operating margin of 17.2%, and its operating leverage amplified its profits over the last five years

3. Performance over the past two years was boosted by share buybacks, which enabled its earnings per share to grow faster than its revenue