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 5.2%. This drawdown was disheartening since the S&P 500 stood firm.
While some companies have durable competitive advantages that enable them to grow consistently, the odds aren’t great for the ones we’re analyzing today. With that said, here are three consumer stocks best left ignored.
Ralph Lauren (RL)
Market Cap: $16.65 billion
Originally founded as a necktie company, Ralph Lauren (NYSE:RL) is an iconic American fashion brand known for its classic and sophisticated style.
Why Do We Think Twice About RL?
- Weak constant currency growth over the past two years indicates challenges in maintaining its market share
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 4.1%
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 2.7 percentage points over the next year
Ralph Lauren is trading at $269.50 per share, or 20.7x forward P/E. Read our free research report to see why you should think twice about including RL in your portfolio.
Sirius XM (SIRI)
Market Cap: $7.39 billion
Known for its commercial-free music channels, Sirius XM (NASDAQ:SIRI) is a broadcasting company that provides satellite radio and online radio services across North America.
Why Should You Dump SIRI?
- Demand for its offerings was relatively low as its number of core subscribers has underwhelmed
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 36.6% annually while its revenue grew
- Eroding returns on capital suggest its historical profit centers are aging
Sirius XM’s stock price of $21.85 implies a valuation ratio of 7.3x forward P/E. Check out our free in-depth research report to learn more about why SIRI doesn’t pass our bar.
RE/MAX (RMAX)
Market Cap: $152.3 million
Short for Real Estate Maximums, RE/MAX (NYSE:RMAX) operates a real estate franchise network spanning over 100 countries and territories.
Why Do We Pass on RMAX?
- Performance surrounding its agents has lagged its peers
- Earnings per share fell by 8.9% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- ROIC of 0% reflects management’s challenges in identifying attractive investment opportunities
At $7.64 per share, RE/MAX trades at 5.9x forward P/E. To fully understand why you should be careful with RMAX, check out our full research report (it’s free).
Stocks We Like More
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 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.
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.