Laser Focus World is an industry bedrock—first published in 1965 and still going strong. We publish original articles about cutting-edge advances in lasers, optics, photonics, sensors, and quantum technologies, as well as test and measurement, and the shift currently underway to usher in the photonic integrated circuits, optical interconnects, and copackaged electronics and photonics to deliver the speed and efficiency essential for data centers of the future.

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Editorial Advisory Board

  • Professor Andrea M. Armani, University of Southern California
  • Ruti Ben-Shlomi, Ph.D., LightSolver
  • James Butler, Ph.D., Hamamatsu
  • Natalie Fardian-Melamed, Ph.D., Columbia University
  • Justin Sigley, Ph.D., AmeriCOM
  • Professor Birgit Stiller, Max Planck Institute for the Science of Light, and Leibniz University of Hannover
  • Professor Stephen Sweeney, University of Glasgow
  • Mohan Wang, Ph.D., University of Oxford
  • Professor Xuchen Wang, Harbin Engineering University
  • Professor Stefan Witte, Delft University of Technology

3 Consumer Stocks Playing with Fire

CCL Cover Image

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 3%. This drawdown was disappointing since the S&P 500 held steady.

Investors should tread carefully as many companies in this space are also unpredictable because they lack recurring revenue business models. With that said, here are three consumer stocks best left ignored.

Carnival (CCL)

Market Cap: $24.75 billion

Boasting outrageous amenities like a planetarium on board its ships, Carnival (NYSE: CCL) is one of the world's largest leisure travel companies and a prominent player in the cruise industry.

Why Do We Pass on CCL?

  1. Sizable revenue base leads to growth challenges as its 3.7% annual revenue increases over the last five years fell short of other consumer discretionary companies
  2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 20.9% annually
  3. Negative returns on capital show management lost money while trying to expand the business

Carnival’s stock price of $19.44 implies a valuation ratio of 10.9x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than CCL.

Mattel (MAT)

Market Cap: $6.82 billion

Known for the creation of iconic toys such as Barbie and Hotwheels, Mattel (NASDAQ: MAT) is a global children's entertainment company specializing in the design and production of consumer products.

Why Is MAT Risky?

  1. Sales stagnated over the last two years and signal the need for new growth strategies
  2. Projected sales growth of 1.8% for the next 12 months suggests sluggish demand
  3. Diminishing returns on capital suggest its earlier profit pools are drying up

At $20.53 per share, Mattel trades at 13.4x forward price-to-earnings. To fully understand why you should be careful with MAT, check out our full research report (it’s free).

Universal Technical Institute (UTI)

Market Cap: $1.46 billion

Founded in 1965, Universal Technical Institute (NYSE: UTI) is a leading provider of technical training programs, specializing in automotive, diesel, collision repair, motorcycle, and marine technicians.

Why Do We Steer Clear of UTI?

  1. Free cash flow margin is forecasted to shrink by 2.6 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
  2. ROIC of 11% reflects management’s challenges in identifying attractive investment opportunities, and its shrinking returns suggest its past profit sources are losing steam
  3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

Universal Technical Institute is trading at $26.70 per share, or 23.9x forward price-to-earnings. If you’re considering UTI for your portfolio, see our FREE research report to learn more.

Stocks We Like More

The Trump trade may have passed, but rates are still dropping and inflation is still cooling. Opportunities are ripe for those ready to act - and we’re here to help you pick them.

Get started 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 Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.

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