Most consumer discretionary businesses succeed or fail based on the broader economy. This sensitive demand profile can cause the industry to stumble when macro uncertainty enters the fray, and over the past six months, its returns were flat. This performance was similar to the S&P 500.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. With that said, here is one consumer stock boasting a durable advantage and two we’re swiping left on.
Two Consumer Discretionary Stocks to Sell:
Wynn Resorts (WYNN)
Market Cap: $9.21 billion
Founded by the former Mirage Resorts CEO, Wynn Resorts (NASDAQ: WYNN) is a global developer and operator of high-end hotels and casinos, known for its luxurious properties and premium guest services.
Why Does WYNN Fall Short?
- Lackluster 1.5% annual revenue growth over the last five years indicates the company is losing ground to competitors
- Sales are projected to remain flat over the next 12 months as demand decelerates from its two-year trend
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
At $87.70 per share, Wynn Resorts trades at 18.5x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than WYNN.
Carriage Services (CSV)
Market Cap: $595 million
Established in 1991, Carriage Services (NYSE: CSV) is a provider of funeral and cemetery services in the United States.
Why Are We Hesitant About CSV?
- Sales trends were unexciting over the last two years as its 4.5% annual growth was below the typical consumer discretionary company
- Anticipated sales growth of 7.2% for the next year implies demand will be shaky
- ROIC of 10.3% reflects management’s challenges in identifying attractive investment opportunities, and its falling returns suggest its earlier profit pools are drying up
Carriage Services’s stock price of $39.14 implies a valuation ratio of 12.3x forward price-to-earnings. Read our free research report to see why you should think twice about including CSV in your portfolio.
One Consumer Discretionary Stock to Buy:
Deckers (DECK)
Market Cap: $18.29 billion
Established in 1973, Deckers (NYSE: DECK) is a footwear and apparel conglomerate with a portfolio of lifestyle and performance brands.
Why Are We Backing DECK?
- 18% annual revenue growth over the last five years surpassed the sector average as its brand resonated with consumers
- Free cash flow margin is anticipated to expand by 2.6 percentage points over the next year, providing additional flexibility for investments and share buybacks/dividends
- Rising returns on capital show management is finding more attractive investment opportunities
Deckers is trading at $123 per share, or 19x forward price-to-earnings. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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