Consumer staples are considered safe havens in turbulent markets due to their inelastic demand profiles. But they’re also double-edged swords as they often lag in booming conditions, and this pattern has persisted recently. Over the past six months, the industry has recorded a loss of 7.4%, a far cry from the S&P 500’s 4.1% ascent.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. With that said, here is one consumer stock boasting a durable advantage and two we’re steering clear of.
Market Cap: $9.06 billion
Founded in 1919 as Nebraska Consolidated Mills in Omaha, Nebraska, Conagra Brands today (NYSE:CAG) boasts a diverse portfolio of packaged foods brands that includes everything from whipped cream to jarred pickles to frozen meals.
Why Should You Dump CAG?
Shrinking unit sales over the past two years indicate demand is soft and that the company may need to revise its product strategy
Estimated sales decline of 3.5% for the next 12 months implies an even more challenging demand environment
ROIC of 5.4% reflects management’s challenges in identifying attractive investment opportunities, and its decreasing returns suggest its historical profit centers are aging
Conagra is trading at $19.02 per share, or 7.7x forward P/E. Check out our free in-depth research report to learn more about why CAG doesn’t pass our bar.
Market Cap: $139 million
Known for its Optavia program that combines portion-controlled meal replacements with coaching, Medifast (NYSE:MED) has a broad product portfolio of bars, snacks, drinks, and desserts for those looking to lose weight or consume healthier foods.
Why Is MED Risky?
Annual sales declines of 30.3% for the past three years show its products struggled to connect with the market
Operating margin declined by 10.2 percentage points over the last year as its sales cratered
Earnings per share have contracted by 27% annually over the last three years, a headwind for returns as stock prices often echo long-term EPS performance
At $13.44 per share, Medifast trades at 0.4x forward price-to-sales. To fully understand why you should be careful with MED, check out our full research report (it’s free).
Market Cap: $364.9 billion
Founded by candle maker William Procter and soap maker James Gamble, Proctor & Gamble (NYSE:PG) is a consumer products behemoth whose product portfolio spans everything from facial tissues to laundry detergent to feminine care to men’s grooming.
Story Continues