Consumer staples are considered safe havens in turbulent markets due to their inelastic demand profiles. But recently, the industry has failed to do its job as it shed 9.5% over the past six months. This drop was especially discouraging since the S&P 500 held steady.
Some companies can buck this trend, but 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.
Clorox (CLX)
Market Cap: $18.29 billion
Founded in 1913 with bleach as the sole product offering, Clorox (NYSE:CLX) today is a consumer products giant whose product portfolio spans everything from bleach to skincare to salad dressing to kitty litter.
Why Do We Think Twice About CLX?
- Sales were flat over the last three years, indicating it's failed to expand its business
- Projected sales for the next 12 months are flat and suggest demand will be subdued
- Free cash flow margin has stayed in place over the last year
Clorox is trading at $148.20 per share, or 20.7x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than CLX.
Nature's Sunshine (NATR)
Market Cap: $243.1 million
Started on a kitchen table in Utah, Nature’s Sunshine (NASDAQ:NATR) manufactures and sells nutritional and personal care products.
Why Does NATR Give Us Pause?
- Products fail to spark excitement with consumers, as seen in its flat sales over the last three years
- Smaller revenue base of $454.4 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Earnings per share fell by 31.3% annually over the last three years while its revenue was flat, showing each sale was less profitable
At $13.15 per share, Nature's Sunshine trades at 16.6x forward price-to-earnings. Check out our free in-depth research report to learn more about why NATR doesn’t pass our bar.
Estée Lauder (EL)
Market Cap: $24.78 billion
Named after its founder, who was an entrepreneurial woman from New York with a passion for skincare, Estée Lauder (NYSE:EL) is a one-stop beauty shop with products in skincare, fragrance, makeup, sun protection, and men’s grooming.
Why Do We Pass on EL?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Inability to adjust its cost structure while its revenue declined over the last year led to a 9 percentage point drop in the company’s operating margin
- Earnings per share have dipped by 31.3% annually over the past three years, which is concerning because stock prices follow EPS over the long term
Estée Lauder’s stock price of $68.65 implies a valuation ratio of 33.1x forward price-to-earnings. If you’re considering EL for your portfolio, see our FREE research report to learn more.
Stocks We Like More
With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run - and we’re laser-focused on finding the best stocks for this upcoming cycle.
Put yourself in the driver’s seat 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 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.