Most consumer discretionary businesses succeed or fail based on the broader economy. This sensitive demand profile can cause discretionary stocks to plummet when macro uncertainty enters the fray, and over the past six months, the industry has shed 8.3%. This drawdown was worse than the S&P 500’s 2% loss.
A cautious approach is imperative when dabbling in these companies as many also lack recurring revenue characteristics and ride short-term fads. Keeping that in mind, here are three consumer stocks best left ignored.
E.W. Scripps (SSP)
Market Cap: $166.9 million
Founded as a chain of daily newspapers, E.W. Scripps (NASDAQ: SSP) is a diversified media enterprise operating a range of local television stations, national networks, and digital media platforms.
Why Are We Out on SSP?
- 1.1% annual revenue growth over the last two years was slower than its consumer discretionary peers
- Projected 10.3 percentage point decline in its free cash flow margin next year reflects the company’s plans to increase its investments to defend its market position
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
At $1.90 per share, E.W. Scripps trades at 0.5x forward EV-to-EBITDA. If you’re considering SSP for your portfolio, see our FREE research report to learn more.
Nike (NKE)
Market Cap: $83.78 billion
Originally selling Japanese Onitsuka Tiger sneakers as Blue Ribbon Sports, Nike (NYSE: NKE) is a global titan in athletic footwear, apparel, equipment, and accessories.
Why Should You Sell NKE?
- Weak constant currency growth over the past two years indicates challenges in maintaining its market share
- Sales are projected to tank by 6.4% over the next 12 months as its demand continues evaporating
- Waning returns on capital imply its previous profit engines are losing steam
Nike’s stock price of $56.78 implies a valuation ratio of 28.1x forward P/E. Check out our free in-depth research report to learn more about why NKE doesn’t pass our bar.
Crocs (CROX)
Market Cap: $5.31 billion
Founded in 2002, Crocs (NASDAQ: CROX) sells casual footwear and is known for its iconic clog shoe.
Why Does CROX Give Us Pause?
- Constant currency revenue growth has disappointed over the past two years and shows demand was soft
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 2.9 percentage points
- Eroding returns on capital suggest its historical profit centers are aging
Crocs is trading at $94.50 per share, or 7.6x forward P/E. Dive into our free research report to see why there are better opportunities than CROX.
Stocks That Overcame Trump’s 2018 Tariffs
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 6 Stocks for this week. 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 Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.
