Whether you see them or not, industrials businesses play a crucial part in our daily activities. Their momentum is also rising as lower interest rates have incentivized higher capital spending. As a result, the industry has posted a 45.7% gain over the past six months, beating the S&P 500 by 15 percentage points.
Nevertheless, investors must be mindful as the cycle can unexpectedly turn. When this inevitably happens, only the elite companies will survive and ultimately thrive. On that note, here are three industrials stocks we think can generate sustainable market-beating returns.
Sterling (STRL)
Market Cap: $11.23 billion
Involved in the construction of a major highway, the Grand Parkway in Houston, TX, Sterling Infrastructure (NASDAQ:STRL) provides civil infrastructure construction.
Why Is STRL a Good Business?
- 9.9% annual revenue growth over the last five years surpassed the sector average as its offerings resonated with customers
- Free cash flow margin expanded by 12.1 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
- Rising returns on capital show management is finding more attractive investment opportunities
Sterling’s stock price of $370 implies a valuation ratio of 37.1x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free for active Edge members .
Limbach (LMB)
Market Cap: $1.09 billion
Established in 1901, Limbach (NASDAQ: LMB) provides integrated building systems solutions, including mechanical, electrical, and plumbing services.
Why Could LMB Be a Winner?
- Operating margin improved by 6.2 percentage points over the last five years as it eliminated redundant costs
- Additional sales over the last two years increased its profitability as the 45.1% annual growth in its earnings per share outpaced its revenue
- Free cash flow margin increased by 5.9 percentage points over the last five years, giving the company more capital to invest or return to shareholders
At $93.23 per share, Limbach trades at 21.8x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
Watts Water Technologies (WTS)
Market Cap: $9.40 billion
Founded in 1874, Watts Water (NYSE:WTS) specializes in manufacturing water products and systems for residential, commercial, and industrial applications globally.
Why Does WTS Stand Out?
- Offerings are difficult to replicate at scale and result in a best-in-class gross margin of 45.5%
- Operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
- Share buybacks catapulted its annual earnings per share growth to 20.7%, which outperformed its revenue gains over the last five years
Watts Water Technologies is trading at $281.65 per share, or 27.8x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
Stocks We Like Even More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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