Although the industrial sector faced macroeconomic headwinds that dampened its growth over the past two years, rapid technological developments are driving long-term growth for the industrial equipment sector. In light of this, investors could look to consider buying fundamentally strong industrial stocks EnerSys (ENS), Preformed Line Products Company (PLPC), LSI Industries Inc. (LYTS).
Despite ongoing challenges of high-interest rates, as well as persistent inflation increasing energy and material costs, the sector has shown resilience. Investors’ interest in industrial stocks is evident from the Vanguard Industrials Index Fund (VIS) 10% returns over the past three months.
In addition, the manufacturing sector in the United States is expected to grow at a CAGR of 3% between 2023 and 2028. Also, the industrial machinery market is expected to grow to $708.3 billion in 2027 at a CAGR of 6.7%. Rapid industrialization is likely to continue to drive demand.
Given these factors, investors could look to buy the featured industrial stocks. Let’s take a closer look at their fundamentals.
EnerSys (ENS)
ENS provides various stored energy solutions for industrial applications worldwide. It operates in three segments: Energy Systems, Motive Power, and Specialty.
In terms of forward non-GAAP P/E, ENS’ 13.35x is 21.9% lower than the 17.09x industry average. Its 11.21x forward EV/EBIT is 26.5% lower than the industry average of 15.24x. Likewise, its 1.29x forward EV/Sales is 23.5% lower than the 1.68x industry average.
For the fiscal fourth quarter ended March 31, 2023, ENS’ non-GAAP net earnings increased 50.5% year-over-year to $75.40 million. Its adjusted EBITDA increased 34.6% year-over-year to $118.20 million. In addition, its non-GAAP net EPS came in at $1.82, representing a 51.7% increase over the prior-year period.
ENS’ EPS and revenue for the quarter ending June 30, 2023, are expected to increase 57.1% and 6.9% year-over-year to $1.81 and $960.66 million, respectively. It has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 73.4% to close the last trading session at $102.73.
ENS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the B-rated Industrial - Equipment industry, it is ranked #1 out of 91 stocks. The stock has an A grade for Growth and Sentiment and a B for Value, Stability, and Quality.
Click here to see the additional ratings of ENS for Momentum.
Preformed Line Products Company (PLPC)
PLPC designs and manufactures products and systems that are used in the construction and maintenance of overhead, ground-mounted, and underground networks. The company offers optical ground wire products and splice transmission and distribution lines, connectors for substations, string hardware products, polymer insulators, wildlife protection, substation fittings, and motion control devices.
In terms of trailing-12-month EV/EBITDA, PLPC’s 7.93x is 33.2% lower than the 11.87x industry average. Its 1.30x trailing-12-month EV/Sales is 25.5% lower than the industry average of 1.75x.
PLPC’s net sales for the first quarter that ended March 31, 2023, increased 31.5% year-year-over-year to $181.82 million. Its net income increased 74.1% year-over-year to $21.42 million. Additionally, its EPS attributable to PLPC shareholders came in at $4.28, representing a 71.9% increase over the prior-year quarter.
Over the past year, the stock has gained 170.2% to close the last trading session at $166.35.
PLPC’s POWR Ratings reflect solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It is ranked #2 in the same industry. It has an A grade for Growth and a B for Value, Sentiment, and Quality.
In total, we rate PLPC on eight different levels. Beyond what we stated above, we have also given PLPC grades for Momentum and Stability. Click here to access all the ratings.
LSI Industries Inc. (LYTS)
LYTS produces and sells non-residential lighting and retail display solutions in the United States, Canada, Mexico, Australia, and Latin America. It operates in two segments, Lighting, and Display Solutions.
In terms of forward non-GAAP P/E, LYTS’s 14.80x is 13.4% lower than the 17.09x industry average. Its 8.31x forward EV/EBITDA is 23.9% lower than the industry average of 10.92x. Likewise, its 0.82x forward EV/Sales is 51.3% lower than the 1.68x industry average.
LYTS’ adjusted net income for the third quarter ended March 31, 2023, increased 30.4% year-over-year to $5.50 million. Its adjusted EBITDA increased 32.1% year-over-year to $11.23 million. Additionally, its adjusted EPS came in at $0.19, representing a 26.7% increase over the prior-year quarter.
Analysts expect LYTS’ EPS and revenue for the quarter ending September 30, 2023, to increase 13.6% and 4.7% year-over-year to $0.25 and $133 million, respectively. It has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 133.5% to close the last trading session at $13.10.
LYTS’ positive outlook is 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 is ranked #3 in the Industrial – Equipment industry. It has an A grade for Value and Sentiment and a B for Quality.
We have also given LYTS grades for Growth, Momentum, and Stability. Get all LYTS ratings here.
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ENS shares were trading at $101.41 per share on Friday morning, down $1.32 (-1.28%). Year-to-date, ENS has gained 37.86%, versus a 14.38% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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