Regarded as defensive investments, consumer staples stocks are generally safe bets in choppy markets. The flip side is that they frequently fall behind growth industries when times are good, and this was the reality over the past six months as the sector’s flat performance trailed the S&P 500’s 16.8% gain.

The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. On that note, here are two consumer stocks we think can generate sustainable market-beating returns and one best left ignored.

One Consumer Staples Stock to Sell:

WD-40 (WDFC)

Market Cap: $3.24 billion

Short for “Water Displacement perfected on the 40th try”, WD-40 (NASDAQ: WDFC) is a renowned American consumer goods company known for its iconic and versatile spray, WD-40 Multi-Use Product.

Why Is WDFC Not Exciting?

1. Sales trends were unexciting over the last three years as its 6.6% annual growth was below the typical consumer staples company
2. Smaller revenue base of $603.6 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
3. Capital intensity has ramped up over the last year as its free cash flow margin decreased by 7.1 percentage points

At $239.58 per share, WD-40 trades at 43.6x forward price-to-earnings. Read our free research report to see why you should think twice about including WDFC in your portfolio.

Two Consumer Staples Stocks to Watch:

Hershey (HSY)

Market Cap: $29.53 billion

Best known for its milk chocolate bar and Hershey's Kisses, Hershey (NYSE: HSY) is an iconic company known for its chocolate products.

Why Are We Positive On HSY?

1. Highly efficient business model is illustrated by its impressive 22.8% operating margin
2. Robust free cash flow margin of 14.8% gives it many options for capital deployment
3. Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures

Hershey’s stock price of $146.30 implies a valuation ratio of 16.1x forward price-to-earnings. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.

Philip Morris (PM)

Market Cap: $203.7 billion

Founded in 1847, Philip Morris International (NYSE: PM) manufactures and sells a wide range of tobacco and nicotine-containing products, including cigarettes, heated tobacco products, and oral nicotine pouches.

Why Will PM Outperform?

1. Unit sales averaged 2.9% growth and imply healthy demand for its products
2. Products command premium prices and lead to a best-in-class gross margin of 63.8%
3. Strong free cash flow margin of 24.7% enables it to reinvest or return capital consistently, and its growing cash flow gives it even more resources to deploy

Philip Morris is trading at $131.50 per share, or 18.9x forward price-to-earnings. Is now the right time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market - and we’re zeroing in on the stocks that could benefit immensely.

Take advantage of the rebound 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 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.