3 Best & Worst: Heavy Industry Stocks

TheStreet.com Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking total return performance. We asked the team to study the heavy-industry sector to discern the three best -- and three worst -- stocks in the sector. Their analysis follows.

THREE BEST

Joy Global(JOYG Quote) -- Joy makes mining equipment, which has proved quite profitable based on the company's ROE of 50.25% and profit margin of 12.2%. Joy has jumped nearly 66% over the past 52 weeks and pays a nice dividend, currently yielding 1.4%. A strong cash balance, fueled by steady cash flows, is also a plus. Joy even looks cheap despite its run, with a P/E of 12.3 versus an industry average of 31.

Oshkosh Corporation(OSK Quote) -- On the surface, Oshkosh may look like a real stinker, but its flaws are mainly behind it. The stock has rocketed up 335% over the past 52 weeks and is still trading at a discount forward P/E of 12.23. Its ROE looks pathetic at a -172%, but the losses that fueled that ugly number were one-time non-recurring charges based on impairments to goodwill and long-lived assets. Looking ahead, analysts are predicting strong sales growth that has lead to an attractive PEG ratio of just .71. After beating earnings earlier this week this one looks to be on the right track.

Bucyrus International(BUCY Quote) -- Shares of Bucyrus jumped 67% over the past year as the performance has been solid. An ROE of 27% and a profit margin of 11% form the backbone of the case for the company. While growth has been modest, it still looks like a bargain based on a forward P/E ratio of 15. The company has a sensible amount of debt and has a cash hoard just north of $100 million serving as a nice safety blanket should tough times spring up or an attractive investment comes its way.

THREE WORST

PACCAR(PCAR Quote) -- PACCAR has had decent stock performance over the past year, gaining more than 20% as the S&P 500 added only 4%. But its valuations are now completely out of whack. Its razor-thin profit margin and ROE of 2% and 3.5%, respectively, are not even close to being strong enough to support its current price. With a forward P/E ratio of almost 40 and an astronomical PEG ratio of 14, this stock looks destined for a big decline. The short community seems to agree. With 7.8% of the float sold short making for a ratio of 9.4, it seems that many are betting against this one.