Consumer staples stocks are solid insurance policies in frothy markets ripe for corrections. Surprisingly, the sector hasn’t played its shielding role over the past six months as it tumbled 10.5%. This drawdown was particularly disappointing since the S&P 500 held its ground.
Some companies can buck this trend, but the odds aren’t great for the ones we’re analyzing today. On that note, here are three consumer stocks that may face trouble.
Lamb Weston (LW)
Market Cap: $7.60 billion
Best known for its Grown in Idaho brand, Lamb Weston (NYSE: LW) produces and distributes potato products such as frozen french fries and mashed potatoes.
Why Are We Wary of LW?
- Projected sales are flat for the next 12 months, implying demand will slow from its three-year trend
- Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 5 percentage points
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 0% for the last two years
Lamb Weston’s stock price of $53.49 implies a valuation ratio of 15.7x forward P/E. Read our free research report to see why you should think twice about including LW in your portfolio.
Nature's Sunshine (NATR)
Market Cap: $272.9 million
Started on a kitchen table in Utah, Nature’s Sunshine (NASDAQ: NATR) manufactures and sells nutritional and personal care products.
Why Are We Hesitant About NATR?
- Sales were flat over the last three years, indicating it's failed to expand its business
- Smaller revenue base of $456.6 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Earnings per share fell by 20.6% annually over the last three years while its revenue was flat, showing each sale was less profitable
Nature's Sunshine is trading at $14.77 per share, or 19.2x forward P/E. If you’re considering NATR for your portfolio, see our FREE research report to learn more.
BeautyHealth (SKIN)
Market Cap: $219.2 million
Operating in the emerging beauty health category, the appropriately named BeautyHealth (NASDAQ: SKIN) is a skincare company best known for its Hydrafacial product that cleanses and hydrates skin.
Why Are We Out on SKIN?
- Annual revenue growth of 3.8% over the last three years was below our standards for the consumer staples sector
- Historical operating losses point to an inefficient cost structure
- High net-debt-to-EBITDA ratio of 10× increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $1.80 per share, BeautyHealth trades at 13.7x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why SKIN doesn’t pass our bar.
Stocks We Like More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.
