Most consumer discretionary businesses succeed or fail based on the broader economy. Over the past six months, it seems like demand trends are working against their favor as the industry has tumbled by 9.1%. This drawdown was worse than the S&P 500’s 1.7% fall.
A cautious approach is imperative when dabbling in these companies as many also lack recurring revenue characteristics and ride short-term fads. With that said, here are three consumer stocks best left ignored.
Gray Television (GTN)
Market Cap: $418.2 million
Specializing in local media coverage, Gray Television (NYSE: GTN) is a broadcast company supplying digital media to various markets in the United States.
Why Should You Sell GTN?
- Sales were flat over the last two years, indicating it's failed to expand its business
- Sales are projected to tank by 12.6% over the next 12 months as demand evaporates further
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 9.9 percentage points
Gray Television is trading at $3.70 per share, or 0.5x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including GTN in your portfolio.
Xponential Fitness (XPOF)
Market Cap: $300.5 million
Owner of CycleBar, Rumble, and Club Pilates, Xponential Fitness (NYSE: XPOF) is a boutique fitness brand offering diverse and specialized exercise experiences.
Why Is XPOF Not Exciting?
- 14.3% annual revenue growth over the last two years was slower than its consumer discretionary peers
- Historical operating losses point to an inefficient cost structure
- Push for growth has led to negative returns on capital, signaling value destruction
Xponential Fitness’s stock price of $8.64 implies a valuation ratio of 5x forward P/E. Dive into our free research report to see why there are better opportunities than XPOF.
Delta (DAL)
Market Cap: $28.86 billion
One of the ‘Big Four’ airlines in the US, Delta Air Lines (NYSE: DAL) is a major global air carrier that serves both business and leisure travelers through its domestic and international flights.
Why Do We Think DAL Will Underperform?
- Number of revenue passenger miles has disappointed over the past two years, indicating weak demand for its offerings
- Estimated sales decline of 1.4% for the next 12 months implies a challenging demand environment
- Negative returns on capital show management lost money while trying to expand the business
At $44.25 per share, Delta trades at 7.2x forward P/E. Read our free research report to see why you should think twice about including DAL in your portfolio.
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 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 Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.
