The industrial sector is the backbone of economic development, fueling progress through rising infrastructure projects, advanced technologies, and renewable energy initiatives. As the industry evolves, it's enhancing its productivity and innovation, laying a solid foundation for continued advancement.
Amid this, let’s take a look at some quality industrial stocks, NL Industries, Inc. (NL), Alpha Pro Tech, Ltd. (APT), and Team, Inc. (TISI), which are trading under $10. Moreover, these stocks have earned a ‘Strong Buy’ rating in our proprietary rating system.
As modernization accelerates, the rising demand for industrial products and services directly impacts the sector's growth. Growing investments in research and development across various segments, such as data management, steering systems, interface technologies, and operational automation, are set to drive the Industrial Machinery Equipment and Tools Market forward. The market is expected to hit $330.90 billion by 2032, exhibiting a CAGR of 6.2%.
Moreover, the industrial services market is expected to see strong growth in the next few years. It will grow to $44.05 billion in 2028 at a CAGR of 5.7%.
Additionally, the industrial sector benefits from diversified business lines and global presence, reducing dependency on any single product or customer. This diversification provides more stable returns compared to sectors that are more vulnerable to economic fluctuations.
Let’s look at the featured stocks in detail:
NL Industries, Inc. (NL)
NL is a holding company that operates in the component products industry through its subsidiary, CompX International Inc. (CIX). It offers engineered components, including mechanical and electrical cabinet locks, stainless steel exhaust components, gauges, throttle controls, wake enhancement systems, trim tabs, and related hardware and accessories.
On August 7, buoyed by its strong financial performance, NL announced a special dividend of $0.43 per share and a quarterly dividend of $0.08 per share on its common stock. The special dividend, funded by excess cash flows, is scheduled for payment on August 29, 2024, while its quarterly dividend is payable on September 24, 2024.
NL pays an annual dividend of $0.32, which translates to a yield of 4.74% at the current share price. Its four-year average dividend yield is 5.19%. Moreover, its dividend payouts have increased at a CAGR of 14.5% over the past three years.
In terms of forward non-GAAP P/E, NL is trading at 10.99x, 41.7% lower than the industry average of 18.87x. Likewise, the stock’s trailing-12-month EV/Sales and EV/EBITDA multiples of 1.10 and 10.43 are 41.6% and 21.9% lower than their respective industry averages of 1.88 and 13.35.
NL’s trailing-12-month levered FCF margin of 10.42% is 59.9% higher than the 6.52% industry average. In addition, its trailing-12-month net income margin of 14.10% compares to the industry average of 6.16%.
For the second quarter of 2024, which ended on June 30, NL's net sales amounted to $35.89 million, while its gross margin increased 8.7% year-over-year to $11.17 million. The company’s attributable net income amounted to $7.84 million and $0.16 per share, compared to a loss of $3.11 million and $0.06 per share in 2023. Further, its cash flow from operating activities increased 6.5% year-over-year to $22.28 million.
Street expects NL’s EPS for the fiscal fourth quarter (ending December 2024) to increase 20.6% year-over-year to $0.19. Further, its EPS is estimated to grow by 38.9% year-over-year in the fiscal year 2025, settling at $0.85.
NL’s revenue has grown at a CAGR of 5.2% over the past five years. In addition, its net income and EPS have increased at CAGRs of 21.4% and 21.3% over the same time frame.
Shares of NL have gained 38.2% over the past nine months to close the last trading session at $7.02.
NL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
NL has a B grade for Growth, Value, Momentum, Sentiment, and Quality. It is ranked first out of 83 stocks in the Industrial - Equipment industry. Click here to see NL’s rating for Stability.
Alpha Pro Tech, Ltd. (APT)
Headquartered in Markham, Canada, APT develops, manufactures, and markets a line of high-value, disposable protective apparel, infection control, and building supply products. Its product portfolio includes house wrap, synthetic roof underlayment, shoe covers, bouffant caps, gowns, frocks, face masks, and eye shields. The company operates through two segments: Disposable Protective Apparel; and Building Supply.
On April 3, APT’s Board of Directors authorized an additional $2 million expansion to the existing share repurchase program, bringing the total available funds to $2.7 million. This move reflects the company's confidence in its financial health and could boost stock value by reducing the number of shares outstanding, potentially increasing earnings per share and attracting more investors.
In terms of trailing-12-month EV/Sales, APT is trading at 0.96x, 49.2% lower than the industry average of 1.88x. Likewise, the stock’s trailing-12-month EV/EBIT and Price/Sales multiples of 13.19 and 1.10 are 24.9% and 25.7% lower than the industry averages of 17.59x and 1.48x, respectively.
APT’s trailing-12-month gross profit margin of 39.29% exceeds the 31.35% industry average by 25.3%. Similarly, its trailing-12-month net income margin and ROTA of 7.71% and 6.48% are 25.2% and 32.1% higher than the respective industry averages of 6.16% and 4.91%.
In the fiscal second quarter that ended on June 30, 2024, APT’s net sales increased marginally year-over-year to $16.29 million. Its gross profit grew 12% from the year-ago value to $6.84 million. The company reported income from operations of $1.71 million, indicating a 30.5% growth from the prior year quarter. APT’s net income came in at $1.64 million, up 43.5% year-over-year, while its EPS increased 50% year-over-year to $0.15.
APT’s revenue has grown at a CAGR of 5.5% over the past five years. The company’s EBITDA and EPS increased at CAGRs of 3.4% and 4.8%, respectively, over the same period. Further, the company’s total assets grew at a CAGR of 13.9% over the same time frame.
APT shares have surged 46.3% over the past year and 32.9% over the past nine months to close the last trading session at $5.97.
APT’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has a B grade for Value, Momentum, and Quality. Within the Industrial - Equipment industry, it is ranked #5 out of 83 stocks. Click here to see the additional ratings for APT (Growth, Stability, and Sentiment).
Team, Inc. (TISI)
TISI is a provider of specialty industrial services. The company offers its clients a full suite of conventional, specialized, and proprietary mechanical, heat-treating, and inspection services. It operates through two segments: Inspection and Heat Treating (IHT) and Mechanical Services (MS).
In terms of trailing-12-month EV/Sales, TISI is trading at 0.46x, which is 75.8% lower than the industry average of 1.88x. The stock’s trailing-12-month Price/Cash Flow ratio of 5.34x is 62.6% below the industry average of 14.30x. Also, its trailing-12-month Price/Sales multiple of 0.05 compares to the industry average of 1.48.
Moreover, the stock’s trailing-12-month asset turnover ratio of 1.49x is 92.4% higher than the 0.78x industry average.
TISI’s revenues for the fiscal second quarter (ended June 30, 2024) amounted to $228.62 million, while its gross margin rose 4.3% from the prior-year quarter to $63.55 million. Its operating income improved 142.8% from the year-ago value to $11.16 million. In addition, its consolidated adjusted EBITDA increased 25% year-over-year to $21.81 million.
For fiscal year 2024, the company anticipates total revenue to range from $850 million to $900 million. Additionally, it projects a gross margin between $235 million and $265 million, with adjusted EBITDA expected to fall between $58 million and $68 million.
Over the past three years, TISI’s revenue has grown at a CAGR of 1.2%, while its EBITDA increased at 45.8% CAGR. Moreover, the company’s levered FCF improved at an impressive CAGR of 146.5% over the same period.
Over the past nine months, the stock has gained 41.5%, closing the last trading session at $9.95. It has also surged 50.8% year-to-date.
It’s no surprise that TISI has an overall rating of A, which translates to a Strong Buy in our POWR Ratings system. TISI has a B grade for Growth, Momentum, Sentiment, and Quality. In the B-rated, 80-stock Industrial - Services industry, it is ranked first.
Beyond what is stated above, we’ve also rated TISI for Value and Stability. Get all TISI ratings here.
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NL shares closed at $7.02 on Friday, up $0.27 (+4.00%). Year-to-date, NL has gained 28.44%, versus a 17.36% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
3 Strong Buy-Rated Industrial Stocks Under $10 StockNews.com
