Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. 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 23.5% return over the past six months has topped the S&P 500 by 16 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. With that said, here are three industrials stocks best left ignored.
Trex (TREX)
Market Cap: $4.45 billion
Addressing the demand for aesthetically-pleasing and unique outdoor living spaces, Trex Company (NYSE: TREX) makes wood-alternative decking, railing, and patio furniture.
Why Do We Steer Clear of TREX?
- Annual revenue growth of 4% over the last two years was below our standards for the industrials sector
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 6.1 percentage points
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Trex is trading at $41.44 per share, or 26.6x forward P/E. Dive into our free research report to see why there are better opportunities than TREX.
Universal Logistics (ULH)
Market Cap: $445.5 million
Founded in 1932, Universal Logistics (NASDAQ: ULH) is a provider of customized transportation and logistics solutions operating throughout the United States and in Mexico, Canada, and Colombia.
Why Do We Pass on ULH?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 2.7% annually over the last two years
- Low free cash flow margin of -0.9% declined over the last five years as its investments ramped, giving it little breathing room
- Eroding returns on capital suggest its historical profit centers are aging
Universal Logistics’s stock price of $16.93 implies a valuation ratio of 25x forward P/E. Check out our free in-depth research report to learn more about why ULH doesn’t pass our bar.
Scorpio Tankers (STNG)
Market Cap: $3.41 billion
Operating one of the youngest fleets in the industry, Scorpio Tankers (NYSE: STNG) is an international provider of marine transportation services, specializing in the shipment of refined petroleum.
Why Does STNG Give Us Pause?
- Number of total vessels has disappointed over the past two years, indicating weak demand for its offerings
- Sales are expected to decline once again over the next 12 months as it continues working through a challenging demand environment
- Earnings per share have dipped by 26.5% annually over the past two years, which is concerning because stock prices follow EPS over the long term
At $72.59 per share, Scorpio Tankers trades at 12x forward P/E. To fully understand why you should be careful with STNG, check out our full research report (it’s free).
Stocks We Like More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check 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 244% over the last five years (as of June 30, 2025).
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.
