3 Consumer Stocks We Approach with Caution

September 11, 2025 at 00:31 AM EDT

GPRO Cover Image

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

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3 Consumer Stocks We Approach with Caution

GoPro (GPRO)

The Real Brokerage (REAX)

ADT (ADT)

Stocks We Like More

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