3 Reasons to Avoid GTES and 1 Stock to Buy Instead Jabin Bastian Wed, October 7, 2026 at 11:52 AM EDT 3 min read ^GSPC -0.35% GTES -3.98% Trade GTES on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
Gates Industrial Corporation's 25.4% return over the past six months has outpaced the S&P 500 by 7.9%, and its stock price has climbed to $28.24 per share. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.
Despite the momentum, we're passing on Gates Industrial Corporation for now. Here are three reasons why GTES doesn't excite us, plus one stock we'd rather own.
Investors interested in Engineered Components and Systems companies should track organic revenue in addition to reported 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 failed to grow its organic revenue. 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 accelerate growth, which isn't ideal because M&A can be expensive and risky (integrations often disrupt focus).
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Gates Industrial Corporation's EPS grew at 5.2% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 1.2% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.
Growth gives us insight into a company's long-term potential, but how capital-efficient was that growth? A company's ROIC explains this by showing how much operating profit it makes compared 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 6.9%, somewhat low compared to the best industrials companies that consistently pump out 20%+.
Gates Industrial Corporation isn't a terrible business, but it doesn't pass our bar. With its shares outperforming the market lately, the stock trades at 15.3× forward P/E (or $28.24 per share). This valuation is reasonable, but the company's shakier fundamentals present too much downside risk. We're fairly confident there are better investments elsewhere. We'd recommend looking at our favorite semiconductor picks and shovels play.
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