Most consumer discretionary businesses succeed or fail based on the broader economy. This sensitive demand profile can cause discretionary stocks to plummet when macro uncertainty enters the fray, and over the past six months, the industry has shed 4.4%. This performance was disappointing since the S&P 500 climbed 2.8%.
A cautious approach is imperative when dabbling in these companies as many also lack recurring revenue characteristics and ride short-term fads. On that note, here are three consumer stocks we’re swiping left on.
GoPro (GPRO)
Market Cap: $127.4 million
Known for sponsoring extreme athletes, GoPro (NASDAQ: GPRO) is a camera company known for its POV videos and editing software.
Why Should You Sell GPRO?
- Sales tumbled by 6.1% annually over the last five years, showing consumer trends are working against its favor
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
GoPro is trading at $0.82 per share, or 12.4x forward P/E. Read our free research report to see why you should think twice about including GPRO in your portfolio.
Service International (SCI)
Market Cap: $11.57 billion
Founded in 1962, Service International (NYSE: SCI) is a leading provider of death care products and services in North America.
Why Are We Cautious About SCI?
- Number of funeral services performed has disappointed over the past two years, indicating weak demand for its offerings
- Projected sales growth of 2.6% for the next 12 months suggests sluggish demand
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $81.26 per share, Service International trades at 20.7x forward P/E. If you’re considering SCI for your portfolio, see our FREE research report to learn more.
Universal Technical Institute (UTI)
Market Cap: $1.82 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 Does UTI Give Us Pause?
- Poor expense management has led to an operating margin of 7.8% that is below the industry average
- Free cash flow margin is forecasted to shrink by 1.6 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
- Low returns on capital reflect management’s struggle to allocate funds effectively
Universal Technical Institute’s stock price of $33.38 implies a valuation ratio of 15x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why UTI doesn’t pass our bar.
Stocks We Like More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
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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-small-cap company Exlservice (+354% 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
