Most consumer discretionary businesses succeed or fail based on the broader economy. This sensitive demand profile can cause the industry to underperform when macro uncertainty enters the fray, and over the past six months, its returns were flat while the S&P 500 climbed by 4.7%.
While some companies have durable competitive advantages that enable them to grow consistently, the odds aren’t great for the ones we’re analyzing today. Keeping that in mind, here are three consumer stocks we’re passing on.
Sirius XM (SIRI)
Market cap: $10.36 billion
Known for its commercial-free music channels, Sirius XM (NASDAQ: SIRI) is a broadcasting company that provides satellite radio and online radio services across North America.
Why Do We Pass on SIRI?
- Flat sales over the last five years suggest it must innovate and find new ways to grow
- Free cash flow margin is forecasted to shrink by 2.9 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Sirius XM is trading at $30.57 per share, or 9.5x forward P/E. Check out our free in-depth research report to learn more about why SIRI doesn’t pass our bar.
Marriott (MAR)
Market cap: $108.6 billion
Founded by J. Willard Marriott in 1927, Marriott International (NASDAQ: MAR) is a global hospitality company with a portfolio of over 7,000 properties and 30 brands, spanning 130+ countries and territories.
Why Do We Avoid MAR?
- Softer revenue per room over the past two years suggests it might have to invest in new amenities such as restaurants and bars to attract customers
- Projected 1.7 percentage point decline in its free cash flow margin next year reflects the company’s plans to increase its investments to defend its market position
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Marriott’s stock price of $414.45 implies a valuation ratio of 32.1x forward P/E. If you’re considering MAR for your portfolio, see our FREE research report to learn more.
Newmark (NMRK)
Market cap: $2.16 billion
Founded in 1929, Newmark (NASDAQ: NMRK) provides commercial real estate services, including leasing advisory, global corporate services, investment sales and capital markets, property and facilities management, valuation and advisory, and consulting.
Why Do We Think NMRK Will Underperform?
- Annual revenue growth of 8% over the last five years was below our standards for the consumer discretionary sector
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 3.5% for the last two years
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
At $11.92 per share, Newmark trades at 6.1x forward P/E. Read our free research report to see why you should think twice about including NMRK in your portfolio.
Stocks we like more
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
