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Even if they go mostly unnoticed, industrial businesses are the backbone of our country. Unfortunately, this role also comes with a demand profile tethered to the ebbs and flows of the broader economy, and the industry is currently lagging as its six-month return of 7.2% has trailed the S&P 500’s 9.5% gain.

Investors should tread carefully as timing cyclical companies is a challenging task, and any misstep can have you catching a falling knife. On that note, here are three industrials stocks that may face trouble.

Fastenal (FAST)

Market Cap: $43.33 billion

Founded in 1967, Fastenal (NASDAQ:FAST) provides industrial and construction supplies, including fasteners, tools, safety products, and many other product categories to businesses globally.

Why Does FAST Give Us Pause?

1. 4% annual revenue growth over the last two years was slower than its industrials peers

2. Earnings growth underperformed the sector average over the last two years as its EPS grew by just 3% annually

3. Free cash flow margin dropped by 4.1 percentage points over the last five years, implying the company became more capital intensive as competition picked up

At $75.57 per share, Fastenal trades at 34.8x forward price-to-earnings. Check out our free in-depth research report to learn more about why FAST doesn’t pass our bar.

Cummins (CMI)

Market Cap: $53.08 billion

With more than half of the heavy-duty truck market using its engines at one point, Cummins (NYSE:CMI) offers engines and power systems.

Why Are We Wary of CMI?

1. Estimated sales growth of 1.8% for the next 12 months implies demand will slow from its two-year trend

2. 10.6 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. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Cummins’s stock price of $386.07 implies a valuation ratio of 16.8x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than CMI.

Meritage Homes (MTH)

Market Cap: $5.3 billion

Originally founded in 1985 in Arizona as Monterey Homes, Meritage Homes (NYSE:MTH) is a homebuilder specializing in designing and constructing energy-efficient and single-family homes in the US.

Why Is MTH Risky?

1. Backlog has dropped by 39.1% on average over the past two years, suggesting it’s losing orders as competition picks up

2. 15.4 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. Diminishing returns on capital suggest its earlier profit pools are drying up