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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 8.6%. This drop was worse than the S&P 500’s 1.6% loss.

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. On that note, here are two resilient industrials stocks at the top of our wish list and one we’re passing on.

One Industrials Stock to Sell:

Hayward (HAYW)

Market Cap: $3.02 billion

Credited with introducing the first variable-speed pool pump, Hayward (NYSE:HAYW) makes residential and commercial pool equipment and accessories.

Why Do We Avoid HAYW?

1. Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy

2. Earnings per share have contracted by 56.6% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance

3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 4.9 percentage points

At $13.80 per share, Hayward trades at 19x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than HAYW.

Two Industrials Stocks to Watch:

Montrose (MEG)

Market Cap: $508.9 million

Founded to protect a tree-lined two-lane road, Montrose (NYSE:MEG) provides air quality monitoring, environmental laboratory testing, compliance, and environmental consulting services.

Why Does MEG Stand Out?

1. Market share has increased this cycle as its 24.4% annual revenue growth over the last five years was exceptional

2. Offerings are mission-critical for businesses and lead to a top-tier gross margin of 36.5%

3. Incremental sales over the last two years have been highly profitable as its earnings per share increased by 48.7% annually, topping its revenue gains

Montrose is trading at $14.86 per share, or 17.6x forward price-to-earnings. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

Badger Meter (BMI)

Market Cap: $5.68 billion

The developer of the world’s first frost-proof water meter in 1905, Badger Meter (NYSE:BMI) provides water control and measure equipment to various industries.

Why Are We Backing BMI?

1. Annual revenue growth of 20.9% over the past two years was outstanding, reflecting market share gains this cycle

2. Earnings growth has massively outpaced its peers over the last two years as its EPS has compounded at 36.7% annually

3. BMI is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders