Consumer discretionary businesses are levered to the highs and lows of 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 7%. This performance was disheartening since the S&P 500 gained 1.1%.
A cautious approach is imperative when dabbling in these companies as many also lack recurring revenue characteristics and ride short-term fads. With that said, here are three consumer stocks we’re swiping left on.
Figs (FIGS)
Market Cap: $853.4 million
Rising to fame via TikTok and founded in 2013 by Heather Hasson and Trina Spear, Figs (NYSE: FIGS) is a healthcare apparel company known for its stylish approach to medical attire and uniforms.
Why Does FIGS Give Us Pause?
- Sluggish trends in its active customers suggest customers aren’t adopting its solutions as quickly as the company hoped
- Earnings per share have dipped by 66.7% annually over the past three years, which is concerning because stock prices follow EPS over the long term
- Negative returns on capital show management lost money while trying to expand the business
Figs’s stock price of $5.48 implies a valuation ratio of 68.5x forward P/E. Read our free research report to see why you should think twice about including FIGS in your portfolio.
WideOpenWest (WOW)
Market Cap: $323.5 million
Initially started in Denver as a cable television provider, WideOpenWest (NYSE: WOW) provides high-speed internet, cable, and telephone services to the Midwest and Southeast regions of the U.S.
Why Do We Avoid WOW?
- Performance surrounding its subscribers has lagged its peers
- Cash burn makes us question whether it can achieve sustainable long-term growth
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $3.92 per share, WideOpenWest trades at 1.2x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than WOW.
Matthews (MATW)
Market Cap: $660.2 million
Originally a death care company, Matthews International (NASDAQ: MATW) is a diversified company offering ceremonial services, brand solutions and industrial technologies.
Why Do We Think MATW Will Underperform?
- Annual sales declines of 2.9% for the past two years show its products and services struggled to connect with the market
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 12% annually while its revenue grew
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Matthews is trading at $21.29 per share, or 5.7x forward EV-to-EBITDA. If you’re considering MATW for your portfolio, see our FREE research report to learn more.
Stocks We Like More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
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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-micro-cap company Tecnoglass (+1,754% 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
