Even if they go mostly unnoticed, industrial businesses are the backbone of our country. But they are at the whim of volatile macroeconomic factors that influence capital spending (like interest rates), and the market seems convinced that demand will slow. Due to this bearish outlook, the industry has tumbled by 7.6% over the past six months. This drop was worse than the S&P 500’s 1.8% loss.

Some companies can grow regardless of the economic backdrop, but the odds aren’t great for the ones we’re analyzing today. With that said, here are three industrials stocks we’re swiping left on.

LSI (LYTS)

Market Cap: $507.2 million

Enhancing commercial environments, LSI (NASDAQ:LYTS) provides lighting and display solutions for businesses and retailers.

Why Does LYTS Give Us Pause?

1. 3% annual revenue growth over the last two years was slower than its industrials peers

2. Subpar operating margin of 5.8% constrains its ability to invest in process improvements or effectively respond to new competitive threats

3. Earnings per share lagged its peers over the last two years as they only grew by 5.6% annually

LSI is trading at $17.55 per share, or 15.2x forward price-to-earnings. If you’re considering LYTS for your portfolio, see our FREE research report to learn more .

Keysight (KEYS)

Market Cap: $26.81 billion

Spun off from Hewlett-Packard in 2014, Keysight (NYSE:KEYS) offers electronic measurement products for use in various sectors.

Why Do We Steer Clear of KEYS?

1. Demand cratered as it couldn’t win new orders over the past two years, leading to an average 3.9% decline in its backlog

2. Performance over the past two years shows each sale was less profitable as its earnings per share dropped by 10.1% annually, worse than its revenue

3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

At $154 per share, Keysight trades at 21.7x forward price-to-earnings. To fully understand why you should be careful with KEYS, check out our full research report (it’s free) .

REV Group (REVG)

Market Cap: $1.64 billion

Offering the first full-electric North American fire truck, REV (NYSE:REVG) manufactures and sells specialty vehicles.

Why Are We Wary of REVG?

1. Sales stagnated over the last five years and signal the need for new growth strategies

2. Gross margin of 11.7% is below its competitors, leaving less money to invest in areas like marketing and R&D

3. Responsiveness to unforeseen market trends is restricted due to its substandard operating profitability

REV Group’s stock price of $31.22 implies a valuation ratio of 12.7x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than REVG .

Stocks We Like More

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