The performance of consumer discretionary businesses is closely linked to economic cycles. Over the past six months, it seems like demand trends are working against their favor as the industry has tumbled by 11%. This drop was worse than the S&P 500’s 5.5% loss.
A cautious approach is imperative when dabbling in these companies as many also lack recurring revenue characteristics and ride short-term fads. Taking that into account, here are three consumer stocks best left ignored.
Choice Hotels (CHH)
Market Cap: $5.70 billion
With almost 100% of its properties under franchise agreements, Choice Hotels (NYSE: CHH) is a hotel franchisor known for its diverse brand portfolio including Comfort Inn, Quality Inn, and Clarion.
Why Do We Steer Clear of CHH?
- Revenue per room has underperformed over the past two years, suggesting it may need to develop new facilities
- Estimated sales growth of 1.3% for the next 12 months implies demand will slow from its two-year trend
- Eroding returns on capital suggest its historical profit centers are aging
Choice Hotels’s stock price of $123.67 implies a valuation ratio of 17.6x forward P/E. Dive into our free research report to see why there are better opportunities than CHH.
Target Hospitality (TH)
Market Cap: $683.8 million
Building mini-communities at places such as oil drilling sites, Target Hospitality (NASDAQ: TH) is a provider of specialty workforce lodging accommodations and services.
Why Are We Hesitant About TH?
- Performance surrounding its utilized beds has lagged its peers
- Sales are expected to decline once again over the next 12 months as it continues working through a challenging demand environment
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 7.6% annually
At $6.92 per share, Target Hospitality trades at 8.9x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including TH in your portfolio.
Live Nation (LYV)
Market Cap: $31.64 billion
Owner of Ticketmaster and operator of music festival EDC, Live Nation (NYSE: LYV) is a company specializing in live event promotion, venue management, and ticketing services for concerts and shows.
Why Are We Cautious About LYV?
- Sluggish trends in its events suggest customers aren’t adopting its solutions as quickly as the company hoped
- Poor expense management has led to an operating margin of 4.1% that is below the industry average
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 1.9 percentage points over the next year
Live Nation is trading at $138.18 per share, or 58.2x forward P/E. If you’re considering LYV for your portfolio, see our FREE research report to learn more.
Stocks That Overcame Trump’s 2018 Tariffs
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market 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 Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.
