Most consumer discretionary businesses succeed or fail based on the broader economy. Unfortunately, the industry’s recent performance suggests demand may be slowing as discretionary stocks’ 13.5% return over the past six months has trailed the S&P 500 by 3.4 percentage points.
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. Keeping that in mind, here are three consumer stocks we’re swiping left on.
Under Armour (UAA)
Market Cap: $1.86 billion
Founded in 1996 by a former University of Maryland football player, Under Armour (NYSE: UAA) is an apparel brand specializing in sportswear designed to improve athletic performance.
Why Do We Steer Clear of UAA?
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
- 7× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Under Armour’s stock price of $4.51 implies a valuation ratio of 35.3x forward P/E. Dive into our free research report to see why there are better opportunities than UAA.
Movado (MOV)
Market Cap: $398 million
With its watches displayed in 20 museums around the world, Movado (NYSE: MOV) is a watchmaking company with a portfolio of watch brands and accessories.
Why Should You Dump MOV?
- Products and services have few die-hard fans as sales have declined by 4.3% annually over the last two years
- Anticipated sales growth of 1.2% for the next year implies demand will be shaky
- Eroding returns on capital suggest its historical profit centers are aging
At $17.98 per share, Movado trades at 0.6x forward price-to-sales. If you’re considering MOV for your portfolio, see our FREE research report to learn more.
Vail Resorts (MTN)
Market Cap: $5.25 billion
Founded by two Aspen, Colorado ski patrol guides, Vail Resorts (NYSE: MTN) is a mountain resort company offering luxury experiences in over 30 locations across the globe.
Why Are We Hesitant About MTN?
- Lackluster 1.3% annual revenue growth over the last two years indicates the company is losing ground to competitors
- Sluggish trends in its skier visits suggest customers aren’t adopting its solutions as quickly as the company hoped
- Anticipated sales growth of 1.5% for the next year implies demand will be shaky
Vail Resorts is trading at $146 per share, or 21.5x forward P/E. Dive into our free research report to see why there are better opportunities than MTN.
Stocks We Like More
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