3 Consumer Stocks with Red Flags

Most consumer discretionary businesses succeed or fail based on the broader economy. 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 2.8%. This drawdown was disheartening since the S&P 500 gained 5%.

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 that may face trouble.

Oxford Industries (OXM)

Market Cap: $646.7 million

The parent company of Tommy Bahama, Oxford Industries (NYSE:OXM) is a lifestyle fashion conglomerate with brands that embody outdoor happiness.

Why Should You Dump OXM?

1. Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
2. Demand will likely fall over the next 12 months as Wall Street expects flat revenue
3. Eroding returns on capital suggest its historical profit centers are aging

Oxford Industries is trading at $43.30 per share, or 9.6x forward P/E. If you’re considering OXM for your portfolio, see our FREE research report to learn more.

Comcast (CMCSA)

Market Cap: $134.4 billion

Formerly known as American Cable Systems, Comcast (NASDAQ:CMCSA) is a multinational telecommunications company offering a wide range of services.

Why Are We Out on CMCSA?

1. Sluggish trends in its domestic broadband customers suggest customers aren’t adopting its solutions as quickly as the company hoped
2. Demand is forecasted to shrink as its estimated sales for the next 12 months are flat
3. Underwhelming 8.8% return on capital reflects management’s difficulties in finding profitable growth opportunities

Comcast’s stock price of $35.99 implies a valuation ratio of 8.2x forward P/E. Dive into our free research report to see why there are better opportunities than CMCSA.

Cushman & Wakefield (CWK)

Market Cap: $2.74 billion

With expertise in the commercial real estate sector, Cushman & Wakefield (NYSE:CWK) is a global Chicago-based real estate firm offering a comprehensive range of services to clients.

Why Should You Sell CWK?

1. Annual sales declines of 2.4% for the past two years show its products and services struggled to connect with the market
2. Earnings per share fell by 7.5% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

At $11.85 per share, Cushman & Wakefield trades at 10.6x forward P/E. To fully understand why you should be careful with CWK, check out our full research report (it’s free).

High-Quality Stocks for All Market Conditions

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