3 Consumer Stocks We Think Twice About

Most consumer discretionary businesses succeed or fail based on the broader economy. Lately, it seems like demand trends have worked in their favor as the industry has returned 20.4% over the past six months, outpacing S&P 500 by 7 percentage points.

Although these companies have produced results lately, investors must be mindful because many are fads and only a few will stand the test of time. Keeping that in mind, here are three consumer stocks that may face trouble.

Target Hospitality (TH)

Market Cap: $820.2 million

Building mini-communities at places such as oil drilling sites, Target Hospitality (NASDAQ:TH) is a provider of specialty workforce lodging accommodations and services.

Why Should You Sell TH?

1. Demand for its offerings was relatively low as its number of utilized beds has underwhelmed
2. Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 10.1% annually
3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

Target Hospitality’s stock price of $8.22 implies a valuation ratio of 15.5x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than TH.

Mattel (MAT)

Market Cap: $6.15 billion

Known for the creation of iconic toys such as Barbie and Hotwheels, Mattel (NASDAQ:MAT) is a global children's entertainment company specializing in the design and production of consumer products.

Why Do We Think MAT Will Underperform?

1. Sales trends were unexciting over the last five years as its 3.3% annual growth was below the typical consumer discretionary company
2. Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

At $19.77 per share, Mattel trades at 11.7x forward P/E. To fully understand why you should be careful with MAT, check out our full research report (it’s free for active Edge members).

eXp World (EXPI)

Market Cap: $1.56 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 Are We Out on EXPI?

1. Sluggish trends in its transactions suggest customers aren’t adopting its solutions as quickly as the company hoped
2. Incremental sales over the last five years were much less profitable as its earnings per share fell by 25% annually while its revenue grew
3. Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 3.4% for the last two years

eXp World is trading at $9.88 per share, or 19.2x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including EXPI in your portfolio.

High-Quality Stocks for All Market Conditions

Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.

The names generating the next wave of massive growth are right here in our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% 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.