Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. Still, their generally high capital requirements expose them to the ups and downs of economic cycles, and the market seems to be baking in a prolonged downturn as the industry has shed 1.5% over the past six months. This drawdown is a noticeable divergence from the S&P 500’s 10.9% return.
Some companies can grow regardless of the economic backdrop, but the odds aren’t great for the ones we’re analyzing today. Keeping that in mind, here are three industrials stocks we’re steering clear of.
Ameresco (AMRC)
Market Cap: $1.13 billion
Having played a role in upgrading the energy solutions of Alcatraz Island, Ameresco (NYSE:AMRC) provides energy and renewable energy solutions for various sectors.
Why Does AMRC Worry Us?
- Earnings per share fell by 15.7% annually over the last five years while its revenue grew, partly because it diluted shareholders
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Ameresco’s stock price of $21.59 implies a valuation ratio of 15.8x forward P/E. Read our free research report to see why you should think twice about including AMRC in your portfolio.
NN (NNBR)
Market Cap: $312.2 million
Formerly known as Nuturn, NN (NASDAQ:NNBR) provides metal components, bearings, and plastic and rubber components to the automotive, aerospace, medical, and industrial sectors.
Why Should You Sell NNBR?
- Annual sales declines of 1.1% for the past five years show its products and services struggled to connect with the market during this cycle
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of -0.7% for the last five years
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
NN is trading at $3.78 per share, or 6x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than NNBR.
Toll Brothers (TOL)
Market Cap: $13.59 billion
Started by two brothers who started by building and selling just one home in Pennsylvania, today Toll Brothers (NYSE:TOL) is a luxury homebuilder across the United States.
Why Does TOL Give Us Pause?
- Demand cratered as it couldn’t win new orders over the past two years, leading to an average 8.1% decline in its backlog
- Anticipated sales growth of 1.7% for the next year implies demand will be shaky
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
At $147.40 per share, Toll Brothers trades at 10.6x forward P/E. To fully understand why you should be careful with TOL, check out our full research report (it’s free).
High-Quality Stocks for All Market Conditions
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.