Whether you see them or not, industrials businesses play a crucial part in our daily activities. 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 18.8% for the sector - higher than the S&P 500’s 10% 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 is one industrials stock boasting a durable advantage and two that may face trouble.

Market Cap: $9.71 billion

Formerly called The Ohio Ball Bearing Company, Applied Industrial (NYSE:AIT) distributes industrial products–everything from power tools to industrial valves–and services to a wide variety of industries.

Why Does AIT Worry Us?

Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth

Anticipated sales growth of 5.4% for the next year implies demand will be shaky

Earnings growth underperformed the sector average over the last two years as its EPS grew by just 5% annually

Applied Industrial’s stock price of $260.40 implies a valuation ratio of 23.5x forward P/E. If you’re considering AIT for your portfolio, see our FREE research report to learn more.

Market Cap: $1.49 billion

Creating the first packaged tracing systems, Thermon (NYSE:THR) is a leading provider of engineered industrial process heating solutions for process industries.

Why Does THR Fall Short?

Annual revenue growth of 3.5% over the last two years was below our standards for the industrials sector

Estimated sales growth of 4% for the next 12 months is soft and implies weaker demand

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

Thermon is trading at $45.16 per share, or 22.2x forward P/E. Read our free research report to see why you should think twice about including THR in your portfolio, it’s free.

Market Cap: $1.31 billion

Founded in 1952, Distribution Solutions (NASDAQ:DSGR) provides supply chain solutions and distributes industrial, safety, and maintenance products to various industries.

Why Are We Positive On DSGR?

Annual revenue growth of 15.1% over the last two years was superb and indicates its market share increased during this cycle

Sound unit economics and 33.6% gross margin allow for higher marketing and R&D budgets versus competitors

Earnings per share grew by 34.8% annually over the last two years and trumped its peers

At $28.41 per share, Distribution Solutions trades at 17.8x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.

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