Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. They are also bound to benefit from a friendlier regulatory environment with the Trump administration, and this excitement has led to a six-month gain of 23.5% for the sector - higher than the S&P 500’s 7.6% return.
Regardless of these results, investors should tread carefully. The diversity of companies in this space means that not all are created equal or well-positioned for the inescapable downturn. Taking that into account, here are three industrials stocks we’re steering clear of.
AeroVironment (AVAV)
Market Cap: $14 billion
Focused on the future of autonomous military combat, AeroVironment (NASDAQ: AVAV) specializes in advanced unmanned aircraft systems and electric vehicle charging solutions.
Why Does AVAV Worry Us?
- Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 8.4 percentage points
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 9.9% annually
- Free cash flow margin shrank by 19 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
AeroVironment is trading at $285.50 per share, or 58.5x forward P/E. Dive into our free research report to see why there are better opportunities than AVAV.
Huntington Ingalls (HII)
Market Cap: $17.39 billion
Building Nimitz-class aircraft carriers used in active service, Huntington Ingalls (NYSE: HII) develops marine vessels and their mission systems and maintenance services.
Why Do We Avoid HII?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 4.4% over the last two years was below our standards for the industrials sector
- Estimated sales growth of 3.5% for the next 12 months is soft and implies weaker demand
- Earnings per share have dipped by 2.1% annually over the past five years, which is concerning because stock prices follow EPS over the long term
At $444.77 per share, Huntington Ingalls trades at 24.5x forward P/E. To fully understand why you should be careful with HII, check out our full research report (it’s free).
Ford (F)
Market Cap: $54.97 billion
Established to make automobiles accessible to a broader segment of the population, Ford (NYSE: F) designs, manufactures, and sells a variety of automobiles, trucks, and electric vehicles.
Why Do We Pass on F?
- Flat vehicles sold over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
- Eroding returns on capital suggest its historical profit centers are aging
Ford’s stock price of $13.79 implies a valuation ratio of 9x forward P/E. Check out our free in-depth research report to learn more about why F doesn’t pass our bar.
Stocks We Like More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in 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.
