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Aug. 18, 2015, 12:18 p.m. EDT

10 high-margin industrial stocks with big potential

These companies don’t grab headlines, but they can make you plenty of money

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By Philip van Doorn, MarketWatch

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We thought it would be interesting to list more industrial companies with high operating margins that might be takeout targets or long-term bargains for investors.

Here are the 10 S&P 1500 Industrial sector companies with EBITDA margins of more than 20%, with majority “buy” ratings among analysts polled by FactSet, that have the highest 12-month upside for their stocks, according to the consensus price target:

Company Ticker Industry EBITDA margin - past four quarters Closing price - Aug. 14 Consensus price target Upside potential
Mobile Mini Inc. Portable Storage 34.50% $34.79 $46.67 34%
Pitney Bowes Inc. /zigman2/quotes/200721363/composite PBI Office Equipment/ Supplies 22.61% $21.32 $28.50 34%
United Rentals Inc. /zigman2/quotes/204230955/composite URI Equipment Rental 47.25% $65.33 $83.86 28%
Atlas Worldwide Holdings Inc. /zigman2/quotes/200338181/composite AAWW Air Freight/ Couriers 20.35% $45.06 $57.40 27%
ADT Corp. /zigman2/quotes/202546506/composite ADT Security Services 55.17% $33.25 $42.20 27%
Southwest Airlines Co. /zigman2/quotes/201071949/composite LUV Airlines 21.50% $39.36 $49.63 26%
Trinity Industries Inc. /zigman2/quotes/205634303/composite TRN Railcars/ Construction/ Machinery 22.73% $28.40 $35.67 26%
Ryder Systems Inc. /zigman2/quotes/208674852/composite R Truck Leasing/ Transportation Services 24.27% $89.21 $110.15 23%
Union Pacific Corp. /zigman2/quotes/209717171/composite UNP Railroads 45.29% $92.74 $108.52 17%
General Electric Co. /zigman2/quotes/208495069/composite GE Industrial Conglomerates 21.22% $26.08 $30.31 16%
Source: FactSet

We didn’t pare the list by market value, which means General Electric Co. /zigman2/quotes/208495069/composite GE +0.36% , Union Pacific Corp. /zigman2/quotes/209717171/composite UNP -0.37%  and Southwest Airlines /zigman2/quotes/201071949/composite LUV -0.80%  certainly won’t be considered as near-term targets by Buffett, with GE probably never being considered. But half of those companies have market capitalizations of less than $5 billion, making them relatively small targets.

Here’s the same group, this time with market values and total returns, through Aug. 14:

Company Ticker Market value ($mil) Total return - YTD Total return - 3 years Total return - 5 years Total return - 10 years
Mobile Mini Inc. $1,580 -13% 100% 129% 74%
Pitney Bowes Inc. /zigman2/quotes/200721363/composite PBI $4,305 -11% 82% 46% -19%
United Rentals Inc. /zigman2/quotes/204230955/composite URI $6,231 -36% 102% 443% 252%
Atlas Worldwide Holdings Inc. /zigman2/quotes/200338181/composite AAWW $1,129 -9% -12% -1% 29%
ADT Corp. /zigman2/quotes/202546506/composite ADT $5,650 -7% N/A N/A N/A
Southwest Airlines Co. /zigman2/quotes/201071949/composite LUV $25.952 -7% 346% 254% 198%
Trinity Industries Inc. /zigman2/quotes/205634303/composite TRN $4,386 3% 112% 244% 165%
Ryder Systems Inc. /zigman2/quotes/208674852/composite R $4,761 -3% 132% 147% 198%
Union Pacific Corp. /zigman2/quotes/209717171/composite UNP $80,470 -21% 62% 178% 541%
General Electric Co. /zigman2/quotes/208495069/composite GE $263,315 5% 38% 100% 9%
S&P 1500 Industrials -3% 60% 111% 122%
Source: FactSet

Yes, it looks like a rather weak group of stocks, based on this year’s performance, but maybe that’s not such a bad thing, considering how likely it is that the drop in price for Precision Castparts led to Buffett’s takeout bid.

On Aug. 7, the last trading day before Berkshire’s takeout deal was announced, shares of Precision Castparts closed at $193.88, or 15.5 times the consensus 2015 earnings estimate of $12.54 a share. Even though Levenson of Credit Suisse said the company was trading at a premium to its peer group, its price-to-earnings ratio was well below the S&P 1500 Industrials’ 16.9.

Here are current-year price-to-earnings ratios for the same group of 10 companies:

Company Ticker Closing price - Aug. 14 Consensus 2015 EPS estimate P/E Ratio
Mobile Mini Inc. $34.79 $1.31 26.5
Pitney Bowes Inc. /zigman2/quotes/200721363/composite PBI $21.32 $1.83 11.6
United Rentals Inc. /zigman2/quotes/204230955/composite URI $65.33 $7.97 8.2
Atlas Worldwide Holdings Inc. /zigman2/quotes/200338181/composite AAWW $45.06 $4.95 9.1
ADT Corp. /zigman2/quotes/202546506/composite ADT $33.25 $1.94 17.1
Southwest Airlines Co. /zigman2/quotes/201071949/composite LUV $39.36 $3.45 11.4
Trinity Industries Inc. /zigman2/quotes/205634303/composite TRN $28.40 $4.72 6.0
Ryder Systems Inc. /zigman2/quotes/208674852/composite R $89.21 $6.50 13.7
Union Pacific Corp. /zigman2/quotes/209717171/composite UNP $92.74 $5.64 16.4
General Electric Co. /zigman2/quotes/208495069/composite GE $26.08 $1.30 20.1
Source: FactSet

Of course, a low P/E ratio might signal problems with a company or its industry, and a high P/E may not be a detriment to a stock. Mobile Mini Inc.  is rated “buy” by five of six analysts and has the most upside potential based on consensus price targets, despite having the highest P/E on the list.

Then again, Mobile Mini increased second-quarter sales per share by 25%, the most among this group of companies. Sales per share is a useful measure of revenue growth, because it incorporates any dilution to the share count from the net issuance of stock and any lowering of the share count from buybacks.

Here are quarterly sales-per-share growth numbers for the same group of industrial companies:

Company Ticker Sales per share - most recent quarter Sales per share - year earlier Change in sales per share
Mobile Mini Inc. $2.84 $2.27 25%
Pitney Bowes Inc. /zigman2/quotes/200721363/composite PBI $4.34 $4.69 -7%
United Rentals Inc. /zigman2/quotes/204230955/composite URI $14.62 $13.25 10%
Atlas Worldwide Holdings Inc. /zigman2/quotes/200338181/composite AAWW $18.09 $17.45 4%
ADT Corp. /zigman2/quotes/202546506/composite ADT $5.22 $4.85 8%
Southwest Airlines Co. /zigman2/quotes/201071949/composite LUV $7.59 $7.18 6%
Trinity Industries Inc. /zigman2/quotes/205634303/composite TRN $10.87 $9.44 15%
Ryder Systems Inc. /zigman2/quotes/208674852/composite R $31.20 $31.76 -2%
Union Pacific Corp. /zigman2/quotes/209717171/composite UNP $6.20 $6.65 -7%
General Electric Co. /zigman2/quotes/208495069/composite GE $3.23 $3.57 -10%
Source: FactSet
/zigman2/quotes/200721363/composite
US : U.S.: NYSE
$ 7.19
+0.14 +1.99%
Volume: 1.30M
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
2.78%
Market Cap
$1.22 billion
Rev. per Employee
$291,368
loading...
/zigman2/quotes/204230955/composite
US : U.S.: NYSE
$ 258.59
-0.63 -0.24%
Volume: 481,832
Jan. 22, 2021 4:00p
P/E Ratio
20.50
Dividend Yield
N/A
Market Cap
$18.70 billion
Rev. per Employee
$489,581
loading...
/zigman2/quotes/200338181/composite
US : U.S.: Nasdaq
$ 53.56
+1.30 +2.49%
Volume: 273,208
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.44 billion
Rev. per Employee
$763,643
loading...
/zigman2/quotes/202546506/composite
US : U.S.: NYSE
$ 9.00
-0.13 -1.42%
Volume: 2.81M
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
1.56%
Market Cap
$7.45 billion
Rev. per Employee
$292,895
loading...
/zigman2/quotes/201071949/composite
US : U.S.: NYSE
$ 47.39
-0.38 -0.80%
Volume: 4.81M
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$28.21 billion
Rev. per Employee
$368,882
loading...
/zigman2/quotes/205634303/composite
US : U.S.: NYSE
$ 28.06
+0.01 +0.04%
Volume: 814,098
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
2.99%
Market Cap
$3.20 billion
Rev. per Employee
$253,061
loading...
/zigman2/quotes/208674852/composite
US : U.S.: NYSE
$ 68.24
-0.28 -0.41%
Volume: 391,361
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
3.28%
Market Cap
$3.69 billion
Rev. per Employee
$223,704
loading...
/zigman2/quotes/209717171/composite
US : U.S.: NYSE
$ 207.13
-0.77 -0.37%
Volume: 4.29M
Jan. 22, 2021 4:00p
P/E Ratio
26.29
Dividend Yield
1.87%
Market Cap
$140.10 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/208495069/composite
US : U.S.: NYSE
$ 11.11
+0.04 +0.36%
Volume: 52.43M
Jan. 22, 2021 4:00p
P/E Ratio
26.57
Dividend Yield
0.36%
Market Cap
$96.97 billion
Rev. per Employee
$463,683
loading...
/zigman2/quotes/208495069/composite
US : U.S.: NYSE
$ 11.11
+0.04 +0.36%
Volume: 52.43M
Jan. 22, 2021 4:00p
P/E Ratio
26.57
Dividend Yield
0.36%
Market Cap
$96.97 billion
Rev. per Employee
$463,683
loading...
/zigman2/quotes/209717171/composite
US : U.S.: NYSE
$ 207.13
-0.77 -0.37%
Volume: 4.29M
Jan. 22, 2021 4:00p
P/E Ratio
26.29
Dividend Yield
1.87%
Market Cap
$140.10 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/201071949/composite
US : U.S.: NYSE
$ 47.39
-0.38 -0.80%
Volume: 4.81M
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$28.21 billion
Rev. per Employee
$368,882
loading...
/zigman2/quotes/200721363/composite
US : U.S.: NYSE
$ 7.19
+0.14 +1.99%
Volume: 1.30M
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
2.78%
Market Cap
$1.22 billion
Rev. per Employee
$291,368
loading...
/zigman2/quotes/204230955/composite
US : U.S.: NYSE
$ 258.59
-0.63 -0.24%
Volume: 481,832
Jan. 22, 2021 4:00p
P/E Ratio
20.50
Dividend Yield
N/A
Market Cap
$18.70 billion
Rev. per Employee
$489,581
loading...
/zigman2/quotes/200338181/composite
US : U.S.: Nasdaq
$ 53.56
+1.30 +2.49%
Volume: 273,208
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.44 billion
Rev. per Employee
$763,643
loading...
/zigman2/quotes/202546506/composite
US : U.S.: NYSE
$ 9.00
-0.13 -1.42%
Volume: 2.81M
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
1.56%
Market Cap
$7.45 billion
Rev. per Employee
$292,895
loading...
/zigman2/quotes/201071949/composite
US : U.S.: NYSE
$ 47.39
-0.38 -0.80%
Volume: 4.81M
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$28.21 billion
Rev. per Employee
$368,882
loading...
/zigman2/quotes/205634303/composite
US : U.S.: NYSE
$ 28.06
+0.01 +0.04%
Volume: 814,098
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
2.99%
Market Cap
$3.20 billion
Rev. per Employee
$253,061
loading...
/zigman2/quotes/208674852/composite
US : U.S.: NYSE
$ 68.24
-0.28 -0.41%
Volume: 391,361
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
3.28%
Market Cap
$3.69 billion
Rev. per Employee
$223,704
loading...
/zigman2/quotes/209717171/composite
US : U.S.: NYSE
$ 207.13
-0.77 -0.37%
Volume: 4.29M
Jan. 22, 2021 4:00p
P/E Ratio
26.29
Dividend Yield
1.87%
Market Cap
$140.10 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/208495069/composite
US : U.S.: NYSE
$ 11.11
+0.04 +0.36%
Volume: 52.43M
Jan. 22, 2021 4:00p
P/E Ratio
26.57
Dividend Yield
0.36%
Market Cap
$96.97 billion
Rev. per Employee
$463,683
loading...
/zigman2/quotes/200721363/composite
US : U.S.: NYSE
$ 7.19
+0.14 +1.99%
Volume: 1.30M
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
2.78%
Market Cap
$1.22 billion
Rev. per Employee
$291,368
loading...
/zigman2/quotes/204230955/composite
US : U.S.: NYSE
$ 258.59
-0.63 -0.24%
Volume: 481,832
Jan. 22, 2021 4:00p
P/E Ratio
20.50
Dividend Yield
N/A
Market Cap
$18.70 billion
Rev. per Employee
$489,581
loading...
/zigman2/quotes/200338181/composite
US : U.S.: Nasdaq
$ 53.56
+1.30 +2.49%
Volume: 273,208
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.44 billion
Rev. per Employee
$763,643
loading...
/zigman2/quotes/202546506/composite
US : U.S.: NYSE
$ 9.00
-0.13 -1.42%
Volume: 2.81M
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
1.56%
Market Cap
$7.45 billion
Rev. per Employee
$292,895
loading...
/zigman2/quotes/201071949/composite
US : U.S.: NYSE
$ 47.39
-0.38 -0.80%
Volume: 4.81M
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$28.21 billion
Rev. per Employee
$368,882
loading...
/zigman2/quotes/205634303/composite
US : U.S.: NYSE
$ 28.06
+0.01 +0.04%
Volume: 814,098
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
2.99%
Market Cap
$3.20 billion
Rev. per Employee
$253,061
loading...
/zigman2/quotes/208674852/composite
US : U.S.: NYSE
$ 68.24
-0.28 -0.41%
Volume: 391,361
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
3.28%
Market Cap
$3.69 billion
Rev. per Employee
$223,704
loading...
/zigman2/quotes/209717171/composite
US : U.S.: NYSE
$ 207.13
-0.77 -0.37%
Volume: 4.29M
Jan. 22, 2021 4:00p
P/E Ratio
26.29
Dividend Yield
1.87%
Market Cap
$140.10 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/208495069/composite
US : U.S.: NYSE
$ 11.11
+0.04 +0.36%
Volume: 52.43M
Jan. 22, 2021 4:00p
P/E Ratio
26.57
Dividend Yield
0.36%
Market Cap
$96.97 billion
Rev. per Employee
$463,683
loading...
/zigman2/quotes/200721363/composite
US : U.S.: NYSE
$ 7.19
+0.14 +1.99%
Volume: 1.30M
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
2.78%
Market Cap
$1.22 billion
Rev. per Employee
$291,368
loading...
/zigman2/quotes/204230955/composite
US : U.S.: NYSE
$ 258.59
-0.63 -0.24%
Volume: 481,832
Jan. 22, 2021 4:00p
P/E Ratio
20.50
Dividend Yield
N/A
Market Cap
$18.70 billion
Rev. per Employee
$489,581
loading...
/zigman2/quotes/200338181/composite
US : U.S.: Nasdaq
$ 53.56
+1.30 +2.49%
Volume: 273,208
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.44 billion
Rev. per Employee
$763,643
loading...
/zigman2/quotes/202546506/composite
US : U.S.: NYSE
$ 9.00
-0.13 -1.42%
Volume: 2.81M
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
1.56%
Market Cap
$7.45 billion
Rev. per Employee
$292,895
loading...
/zigman2/quotes/201071949/composite
US : U.S.: NYSE
$ 47.39
-0.38 -0.80%
Volume: 4.81M
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$28.21 billion
Rev. per Employee
$368,882
loading...
/zigman2/quotes/205634303/composite
US : U.S.: NYSE
$ 28.06
+0.01 +0.04%
Volume: 814,098
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
2.99%
Market Cap
$3.20 billion
Rev. per Employee
$253,061
loading...
/zigman2/quotes/208674852/composite
US : U.S.: NYSE
$ 68.24
-0.28 -0.41%
Volume: 391,361
Jan. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
3.28%
Market Cap
$3.69 billion
Rev. per Employee
$223,704
loading...
/zigman2/quotes/209717171/composite
US : U.S.: NYSE
$ 207.13
-0.77 -0.37%
Volume: 4.29M
Jan. 22, 2021 4:00p
P/E Ratio
26.29
Dividend Yield
1.87%
Market Cap
$140.10 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/208495069/composite
US : U.S.: NYSE
$ 11.11
+0.04 +0.36%
Volume: 52.43M
Jan. 22, 2021 4:00p
P/E Ratio
26.57
Dividend Yield
0.36%
Market Cap
$96.97 billion
Rev. per Employee
$463,683
loading...

Philip van Doorn covers various investment and industry topics. He has previously worked as a senior analyst at TheStreet.com. He also has experience in community banking and as a credit analyst at the Federal Home Loan Bank of New York.

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