Whether you see them or not, industrials businesses play a crucial part in our daily activities. But their prominence also brings high exposure to the ups and downs of economic cycles. Luckily, the tide is turning in their favor as the industry’s 16.3% return over the past six months has topped the S&P 500 by 8.3 percentage points.
Although these companies have produced results lately, a cautious approach is imperative. When the cycle naturally turns, the losers can be left for dead while the winners consolidate and take more of the market. Taking that into account, here are three industrials stocks we’re steering clear of.
Middleby (MIDD)
Market Cap: $7.14 billion
Holding a Guinness World Record for creating the world’s fastest conveyor pizza oven, Middleby (NASDAQ: MIDD) is a food service and equipment manufacturer.
Why Do We Steer Clear of MIDD?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Earnings per share were flat over the last two years and fell short of the peer group average
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $185.36 per share, Middleby trades at 17.7x forward P/E. Read our free research report to see why you should think twice about including MIDD in your portfolio.
ArcBest (ARCB)
Market Cap: $3.84 billion
Historically owning furniture, banking, and other subsidiaries, ArcBest (NASDAQ: ARCB) offers full-truckload, less-than-truckload, and intermodal deliveries of freight.
Why Are We Out on ARCB?
- Weak unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 2% annually while its revenue grew
- Eroding returns on capital suggest its historical profit centers are aging
ArcBest’s stock price of $142.50 implies a valuation ratio of 21.7x forward P/E. If you’re considering ARCB for your portfolio, see our FREE research report to learn more.
Park-Ohio (PKOH)
Market Cap: $469 million
Based in Cleveland, Park-Ohio (NASDAQ: PKOH) provides supply chain management services, capital equipment, and manufactured components.
Why Is PKOH Not Exciting?
- Annual sales declines of 1.2% for the past two years show its products and services struggled to connect with the market during this cycle
- Earnings per share decreased by more than its revenue over the last two years, partly because it diluted shareholders
- Negative free cash flow raises questions about the return timeline for its investments
Park-Ohio is trading at $37.22 per share, or 11.2x forward P/E. Check out our free in-depth research report to learn more about why PKOH doesn’t pass our bar.
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 (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
