The performance of consumer discretionary businesses is closely linked to economic cycles. 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 12.3%. This drawdown was noticeably worse than the S&P 500’s 2.1% decline.
Investors should tread carefully as many companies in this space are also unpredictable because they lack recurring revenue business models. On that note, here are three consumer stocks we’re swiping left on.
Movado (MOV)
Market Cap: $373.6 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 Do We Pass on MOV?
- Products and services have few die-hard fans as sales have declined by 1.4% annually over the last five years
- Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
- Eroding returns on capital suggest its historical profit centers are aging
At $16.80 per share, Movado trades at 0.6x forward price-to-sales. Dive into our free research report to see why there are better opportunities than MOV.
Mohawk Industries (MHK)
Market Cap: $6.41 billion
Established in 1878, Mohawk Industries (NYSE: MHK) is a leading producer of floor-covering products for both residential and commercial applications.
Why Do We Think MHK Will Underperform?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Underwhelming 3.5% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its falling returns suggest its earlier profit pools are drying up
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Mohawk Industries is trading at $102.48 per share, or 10x forward P/E. If you’re considering MHK for your portfolio, see our FREE research report to learn more.
eXp World (EXPI)
Market Cap: $1.18 billion
Founded in 2009, eXp World (NASDAQ: EXPI) is a real estate company known for its virtual, cloud-based approach to real estate brokerage.
Why Is EXPI Risky?
- Performance surrounding its transactions has lagged its peers
- Responsiveness to unforeseen market trends is restricted due to its substandard operating profitability
- Negative returns on capital show management lost money while trying to expand the business
eXp World’s stock price of $7.65 implies a valuation ratio of 17.4x forward P/E. To fully understand why you should be careful with EXPI, 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 5 Growth Stocks for this month. 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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.
