Nyse Order Imbalance 219023.0 Shares On Buy Side

What Happened?

A number of stocks fell in the afternoon session after the Dow Jones Industrial Average fell as much as 0.7%, reflecting lingering uncertainty, and capping off a volatile week which saw stocks enjoy some relief as President Donald Trump reduced tensions with European allies by backing off his threat of imposing new tariffs. 

Threats of tariffs initially created uncertainty for businesses, as they can lead to higher costs for multinational corporations and disrupt global supply chains. By withdrawing the threat, the administration removed a significant headwind for the market, prompting a relief rally. This development was a key factor in helping major indexes recover from earlier losses, even as some analysts noted that underlying geopolitical risks and market volatility remain concerns for investors.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Engineered Components and Systems company Park-Ohio fell 3.7%. Is now the time to buy Park-Ohio? Access our full analysis report here, it’s free.
• Engineered Components and Systems company Gates Industrial Corporation fell 3.3%. Is now the time to buy Gates Industrial Corporation? Access our full analysis report here, it’s free.
• Home Builders company D.R. Horton fell 3%. Is now the time to buy D.R. Horton? Access our full analysis report here, it’s free.
• Home Builders company Tri Pointe Homes fell 2.3%. Is now the time to buy Tri Pointe Homes? Access our full analysis report here, it’s free.
• Home Builders company LGI Homes fell 3.5%. Is now the time to buy LGI Homes? Access our full analysis report here, it’s free.

Zooming In On Park-Ohio (PKOH)

Park-Ohio’s shares are quite volatile and have had 17 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 15 days ago when the stock gained 2.5% on the news that markets rotated out of tech names to position themselves for a massive injection of government spending. 

The sector was ignited by President Trump's call for a $1.5 trillion defense budget for 2027, a significant increase that sent defense contractors surging. Northrop Grumman jumped over 10% and Lockheed Martin gained nearly 8%, acting as the primary engine for the sector's outperformance.Beyond the immediate defense rally, the industrial sector benefited from a broader stabilization in energy costs, with crude prices rebounding. This combination of policy-driven demand and stabilizing input costs made heavy industry an attractive destination.

Park-Ohio is up 9.3% since the beginning of the year, but at $22.72 per share, it is still trading 12.4% below its 52-week high of $25.95 from February 2025. Investors who bought $1,000 worth of Park-Ohio’s shares 5 years ago would now be looking at an investment worth $765.76.

What Happened?

A number of stocks jumped in the afternoon session after markets rotated out of tech names to position themselves for a massive injection of government spending. 

The sector was ignited by President Trump's call for a $1.5 trillion defense budget for 2027, a significant increase that sent defense contractors surging. Northrop Grumman jumped over 10% and Lockheed Martin gained nearly 8%, acting as the primary engine for the sector's outperformance.Beyond the immediate defense rally, the industrial sector benefited from a broader stabilization in energy costs, with crude prices rebounding. This combination of policy-driven demand and stabilizing input costs made heavy industry an attractive destination.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Engineered Components and Systems company Worthington jumped 3.7%. Is now the time to buy Worthington? Access our full analysis report here, it’s free.
• Gas and Liquid Handling company Helios jumped 3.5%. Is now the time to buy Helios? Access our full analysis report here, it’s free.
• Gas and Liquid Handling company Ingersoll Rand jumped 3.8%. Is now the time to buy Ingersoll Rand? Access our full analysis report here, it’s free.
• Engineered Components and Systems company Gates Industrial Corporation jumped 3.4%. Is now the time to buy Gates Industrial Corporation? Access our full analysis report here, it’s free.
• Professional Tools and Equipment company Kennametal jumped 2.9%. Is now the time to buy Kennametal? Access our full analysis report here, it’s free.

Zooming In On Ingersoll Rand (IR)

Ingersoll Rand’s shares are not very volatile and have only had 7 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

The biggest move we wrote about over the last year was 11 months ago when the stock dropped 5.8% on the news that the company reported weak fourth-quarter results. Its organic revenue slightly missed and its revenue was in line with Wall Street's estimates. Looking ahead, guidance largely came in below expectations. Overall, this was a softer quarter.

Ingersoll Rand is up 5.8% since the beginning of the year, but at $84.38 per share, it is still trading 10.5% below its 52-week high of $94.23 from January 2025. Investors who bought $1,000 worth of Ingersoll Rand’s shares 5 years ago would now be looking at an investment worth $1,818.

Over the last six months, Gates Industrial Corporation’s shares have sunk to $21.75, producing a disappointing 9% loss - a stark contrast to the S&P 500’s 9.9% gain. This was partly driven by its softer quarterly results and might have investors contemplating their next move.

Is there a buying opportunity in Gates Industrial Corporation, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free for active Edge members.

Why Is Gates Industrial Corporation Not Exciting?

Even though the stock has become cheaper, we don't have much confidence in Gates Industrial Corporation. Here are three reasons why GTES doesn't excite us and a stock we'd rather own.

1. Core Business Falling Behind as Demand Declines

We can better understand Engineered Components and Systems companies by analyzing their organic revenue. This metric gives visibility into Gates Industrial Corporation’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.

Over the last two years, Gates Industrial Corporation’s organic revenue averaged 2% year-on-year declines. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Gates Industrial Corporation might have to lean into acquisitions to grow, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus).

2. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Gates Industrial Corporation’s revenue to rise by 3.6%. Although this projection indicates its newer products and services will spur better top-line performance, it is still below average for the sector.

3. Previous Growth Initiatives Haven’t Impressed

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Gates Industrial Corporation historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 7%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

Final Judgment

Gates Industrial Corporation isn’t a terrible business, but it isn’t one of our picks. After the recent drawdown, the stock trades at 14× forward P/E (or $21.75 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are superior stocks to buy right now. We’d suggest looking at the Amazon and PayPal of Latin America.