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Even if they go mostly unnoticed, industrial businesses are the backbone of our country. Unfortunately, this role also comes with a demand profile tethered to the ebbs and flows of the broader economy, and investors seem to be forecasting a downturn - over the past six months, the industry has pulled back by 6.6%. This performance was worse than the S&P 500’s 1% loss.

Investors should tread carefully as timing cyclical companies is a challenging task, and any misstep can have you catching a falling knife. Taking that into account, here are three industrials stocks best left ignored.

Gorman-Rupp (GRC)

Market Cap: $1.03 billion

Powering fluid dynamics since 1934, Gorman-Rupp (NYSE:GRC) has evolved from its Ohio origins into a global manufacturer and seller of pumps and pump systems.

Why Are We Cautious About GRC?

1. Sales trends were unexciting over the last two years as its 7.1% annual growth was below the typical industrials company

2. Estimated sales growth of 3.8% for the next 12 months implies demand will slow from its two-year trend

3. Free cash flow margin dropped by 4.2 percentage points over the last five years, implying the company became more capital intensive as competition picked up

Gorman-Rupp’s stock price of $39.03 implies a valuation ratio of 18.2x forward P/E. If you’re considering GRC for your portfolio, see our FREE research report to learn more.

Ameresco (AMRC)

Market Cap: $766.4 million

Having played a role in upgrading the energy solutions of Alcatraz Island, Ameresco (NYSE:AMRC) provides energy and renewable energy solutions for various sectors.

Why Should You Dump AMRC?

1. Sales trends were unexciting over the last two years as its 6.1% annual growth was below the typical industrials company

2. Cash-burning tendencies make us wonder if it can sustainably generate shareholder value

3. Short cash runway increases the probability of a capital raise that dilutes existing shareholders

At $14.57 per share, Ameresco trades at 13.9x forward P/E. Check out our free in-depth research report to learn more about why AMRC doesn’t pass our bar.

Champion Homes (SKY)

Market Cap: $5.32 billion

Founded in 1951, Champion Homes (NYSE:SKY) is a manufacturer of modular homes and buildings in North America.

Why Is SKY Not Exciting?

1. Flat unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases

2. Earnings per share decreased by more than its revenue over the last two years, partly because it diluted shareholders

3. Waning returns on capital imply its previous profit engines are losing steam