Most consumer discretionary businesses succeed or fail based on the broader economy. Lately, it seems like demand trends have worked in their favor as the industry has returned 7.5% over the past six months, similar to the S&P 500.
Nevertheless, this stability can be deceiving as many companies in this space lack recurring revenue characteristics and ride short-term fads. With that said, here are three consumer stocks that may face trouble.
FOX (FOXA)
Market Cap: $25.51 billion
Founded in 1915, Fox (NASDAQ: FOXA) is a diversified media company, operating prominent cable news, television broadcasting, and digital media platforms.
Why Do We Avoid FOXA?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 5.5% over the last five years was below our standards for the consumer discretionary sector
- Free cash flow margin is forecasted to shrink by 4.6 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
- ROIC hasn’t moved, making investors question whether its recent investments can increase profitability
FOX is trading at $63.64 per share, or 12.7x forward P/E. To fully understand why you should be careful with FOXA, check out our full research report (it’s free).
Red Rock Resorts (RRR)
Market Cap: $3.05 billion
Founded in 1976, Red Rock Resorts (NASDAQ: RRR) operates a range of casino resorts and entertainment properties, primarily in the Las Vegas metropolitan area.
Why Are We Out on RRR?
- Lackluster 11.8% annual revenue growth over the last five years indicates the company is losing ground to competitors
- Low free cash flow margin of 12.2% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
At $53.34 per share, Red Rock Resorts trades at 17.7x forward P/E. Check out our free in-depth research report to learn more about why RRR doesn’t pass our bar.
JLL (JLL)
Market Cap: $14.63 billion
Founded in 1999 through the merger of Jones Lang Wootton and LaSalle Partners, JLL (NYSE: JLL) is a company specializing in real estate advisory and investment management services.
Why Should You Dump JLL?
- The company has faced growth challenges as its 10.1% annual revenue increases over the last five years fell short of other consumer discretionary companies
- Poor free cash flow margin of 2.9% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Stagnant returns on capital show management has failed to improve the company’s business quality
JLL’s stock price of $315.03 implies a valuation ratio of 13.6x forward P/E. Read our free research report to see why you should think twice about including JLL in your portfolio.
Stocks We Like More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn't over. Find out which 9 stocks made the cut this week - FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
