Most consumer discretionary businesses succeed or fail based on the broader economy. Unfortunately, the industry’s recent performance suggests demand may be slowing as discretionary stocks’ 2.3% return over the past six months has trailed the S&P 500 by 11.3 percentage points.
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. With that said, here are three consumer stocks best left ignored.
Columbia Sportswear (COLM)
Market Cap: $2.95 billion
Originally founded as a hat store in 1938, Columbia Sportswear (NASDAQ:COLM) is a manufacturer of outerwear, sportswear, and footwear designed for outdoor enthusiasts.
Why Are We Bearish on COLM?
- Lackluster 3.9% annual revenue growth over the last five years indicates the company is losing ground to competitors
- Low free cash flow margin of 8.5% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Columbia Sportswear is trading at $57.79 per share, or 14.9x forward P/E. Check out our free in-depth research report to learn more about why COLM doesn’t pass our bar.
Optimum Communications (OPTU)
Market Cap: $387.7 million
Based in Long Island City, Optimum Communications (NYSE:OPTU) is a telecommunications company offering cable, internet, telephone, and television services across the United States.
Why Do We Think OPTU Will Underperform?
- Sluggish trends in its broadband subscribers suggest customers aren’t adopting its solutions as quickly as the company hoped
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- High net-debt-to-EBITDA ratio of 8× could force the company to raise capital on unfavorable terms if market conditions deteriorate
At $0.99 per share, Optimum Communications trades at 7.9x forward EV-to-EBITDA. If you’re considering OPTU for your portfolio, see our FREE research report to learn more.
Latham (SWIM)
Market Cap: $794.1 million
Started as a family business, Latham (NASDAQ:SWIM) is a global designer and manufacturer of in-ground residential swimming pools and related products.
Why Do We Steer Clear of SWIM?
- Flat sales over the last five years suggest it must innovate and find new ways to grow
- Projected 8.3 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
- Rising returns on capital show management is making relatively better investments
Latham’s stock price of $6.76 implies a valuation ratio of 27.6x forward P/E. Read our free research report to see why you should think twice about including SWIM in your portfolio.
Stocks We Like More
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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.