Most consumer discretionary businesses succeed or fail based on the broader economy. This volatility leads to big swings in stock prices that have worked in their favor recently - over the past six months, the industry has returned 22.7% and beat the S&P 500 by 5.3 percentage points.
Nevertheless, this stability can be deceiving as many companies in this space lack recurring revenue characteristics and ride short-term fads. Taking that into account, here are three consumer stocks we’re passing on.
GoPro (GPRO)
Market Cap: $257.8 million
Known for sponsoring extreme athletes, GoPro (NASDAQ: GPRO) is a camera company known for its POV videos and editing software.
Why Do We Steer Clear of GPRO?
- Products and services have few die-hard fans as sales have declined by 3.9% annually over the last five years
- Diminishing returns on capital suggest its earlier profit pools are drying up
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
At $1.64 per share, GoPro trades at 0.3x trailing 12-month price-to-sales. Read our free research report to see why you should think twice about including GPRO in your portfolio.
The Real Brokerage (REAX)
Market Cap: $1.05 billion
Founded in Toronto, Canada in 2014, The Real Brokerage (NASDAQ: REAX) is a technology-driven real estate brokerage firm combining a tech-centric model with an agent-centric philosophy.
Why Are We Hesitant About REAX?
- Historical operating margin losses point to an inefficient cost structure
- Earnings per share were flat over the last five years while its revenue grew, showing its incremental sales were less profitable
- Poor free cash flow margin of 3.4% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
The Real Brokerage is trading at $5.17 per share, or 18.9x forward EV-to-EBITDA. To fully understand why you should be careful with REAX, check out our full research report (it’s free).
ADT (ADT)
Market Cap: $7.09 billion
Founded in 1874 and headquartered in Boca Raton, Florida, ADT (NYSE: ADT) is a provider of security, automation, and smart home solutions, offering comprehensive services for home and business protection.
Why Does ADT Fall Short?
- Performance surrounding its customers has lagged its peers
- Projected sales growth of 3.8% for the next 12 months suggests sluggish demand
- Low returns on capital reflect management’s struggle to allocate funds effectively
ADT’s stock price of $8.59 implies a valuation ratio of 9.8x forward P/E. Check out our free in-depth research report to learn more about why ADT doesn’t pass our bar.
Stocks We Like More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound 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 183% over the last five years (as of March 31st 2025).
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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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