The industrial sector stands resilient even after facing economic headwinds. Amid this, let’s take a look at some top-rated industrial stocks, NL Industries, Inc. (NL), Ultralife Corporation (ULBI), and Alpha Pro Tech, Ltd. (APT), which are trading under $10.
Over the past year, rising interest rates have negatively impacted equipment industries as it became difficult for such companies with capital-intensive businesses to procure funds with such high rates prevailing in the market.
Even after facing substantial challenges, industrial production rose 0.4% in March, while capacity utilization increased to 79.8% in March, 0.1 percentage points above its long-run average.
The sector is driven by construction and infrastructure investments, manufacturing and factory automation, increasing regulation for energy and fuel efficiency, growth in developing countries, and the rising middle class. The revenue in the U.S. industrial machinery and equipment wholesaling industry is expected to be $313.90 billion in 2023.
Moreover, the stocks in the industrial sector are diversified across business lines and geographies which enables them to avert reliance on a single product or clientele. This, in turn, allows more steady returns than targeted sectors that the ebb and flow of economic cycles might disrupt.
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 March 23, the company paid its shareholders a quarterly dividend of $0.07 per share on its common stock. NL’s four-year average dividend yield is 3.23%, and its current dividend of $0.28 translates to a 4.27% yield on prevailing prices. Its dividend has grown at a CAGR of 91.3% over the past three years.
In terms of trailing-12-month EV/Sales, NL is trading at 1.21x, 26.8% lower than the industry average of 1.66x. The stock’s trailing-12-month EV/EBITDA of 9.74x is 16.3% lower than the 11.63x industry average. Furthermore, the stock’s trailing-12-month Price/Book of 0.84x compares to the 2.56x industry average.
NL’s net sales increased 18.3% year-over-year to $166.60 million in the fiscal year that ended December 31, 2022. Its gross margin grew 14.3% from the year-ago value to $48.80 million, while its income from operations increased 30.5% year-over-year to $13.70 million over the period. Also, the company’s attributable net income amounted to $33.80 million and $0.69 per share in the same period.
Analysts expect NL’s EPS and revenue for the fiscal year 2024 to increase 112.5% and 2.3% year-over-year to $0.68 and $177 million, respectively. Its revenue and EPS have grown at CAGRs of 10.3% and 9.4%, respectively, over the past three years.
The stock has gained 6.7% over the past month to close the last trading session at $6.56.
NL’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to 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 is also rated a B in Stability and Momentum. In the 113-stock B-rated Industrial - Equipment industry, it is ranked # 28.
To see additional POWR Ratings for Growth, Value, Sentiment, and Quality for NL, click here.
Ultralife Corporation (ULBI)
ULBI and its subsidiaries design, manufacture, install, and maintain power, communication, and electronics systems worldwide. The company operates in two segments: Battery and Energy Products; and Communications Systems.
The stock’s trailing-12-month EV/Sales and Price/Sales of 0.64x and 0.50x, respectively, are 61.6% and 61.2% lower than the 1.66x and 1.29x industry averages. In addition, its 0.57x trailing-12-month Price/Book is also lower than the 2.56x industry average.
In the fourth quarter that ended December 31, 2022, ULBI’s total revenues increased 63.5% year-over-year to $36.11 million. Its gross profit rose 52.8% from the year-ago value to $8.08 million, while its operating income came in at $217,000 compared to an operating loss of $1.23 million. The company’s adjusted EBITDA amounted to $2.03 million, compared to an adjusted EBITDA loss of $63,000 in the prior-year quarter.
ULBI’s revenue and total assets have grown at CAGRs of 7.3% and 5.2%, respectively, over the past three years.
Street expects ULBI’s revenue to increase 34.2% in the fiscal year 2022 and 3.5% in the fiscal year 2023 to $131.84 million and $136.50 million, respectively. The company’s EPS is expected to grow by 17.5% per annum in the next five years. The stock has gained 6% year-to-date to close the last trading session at $4.09.
ULBI’s POWR Ratings reflect its solid prospects. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. It also has a B grade in Value. Within the same industry, it is ranked #26.
Beyond what we stated above, we also have ULBI’s ratings for Growth, Momentum, Stability, Sentiment, and Quality. Get all ULBI ratings here.
Alpha Pro Tech, Ltd. (APT)
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.
In terms of trailing-12-month EV/Sales, APT is trading at 0.56x, 66.2% lower than the industry average of 1.66x. Likewise, the stock’s trailing-12-month EV/EBIT and Price/Book of 7.48x and 0.81x are 53.1% and 68.4% lower than the industry averages of 15.93x and 2.56x, respectively.
During the fourth quarter, which ended December 31, APT’s total operating expenses decreased marginally year-over-year to $4.05 million. Its net income amounted to $564,000 and $0.05 per share in the same period.
In addition, the company’s total liabilities as of December 31 decreased 23.2% to $4.04 million, compared to $5.27 million as of December 31, 2021.
APT’s EPS is expected to increase by 15% per annum over the next five years. The stock’s revenue and EBITDA grew at CAGRs of 9.9% and 14.7% over the past three years. Likewise, its levered FCF grew at a CAGR of 44.8% during the same period.
Shares of APT have gained marginally over the past month to close the last trading session at $4.02.
APT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. APT has a B grade in Value, Momentum, and Quality. Out of 113 stocks in the same industry, it is ranked #14.
Click here to access the additional POWR Ratings for APT (Growth, Stability, and Sentiment).
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NL shares were trading at $6.59 per share on Monday afternoon, up $0.03 (+0.46%). Year-to-date, NL has declined -2.30%, versus a 8.10% 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.
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