Companies in the consumer discretionary sector sell nonessential goods and services, such as appliances, cars, and entertainment. Prominent examples include Home Depot Inc. (HD), McDonald’s Corp. (MCD), and Nike Inc. (NKE). Consumer discretionary companies tend to be more sensitive to the overall business cycle because consumers are more likely to reduce or postpone discretionary purchases when times are tough. Therefore, discretionary stocks outperform the overall market during economic expansions, but underperform it during economic contractions, By contrast, companies in the consumer staples sector sell essential items such as food and beverages, which are less sensitive to business cycles.
Consumer discretionary stocks, represented by the Consumer Discretionary Select Sector SPDR ETF (XLY), have outperformed the broader market, providing investors with a total return of 37.8% compared to the iShares Russell 1000 ETF’s (IWB) total return of 33.5% over the past 12 months. These market performance figures and all data in the tables below are as of Nov. 18, 2021.
Here are the top three consumer discretionary stocks with the best value, the fastest growth, and the most momentum.
These are the consumer discretionary stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated. But they could also turn out to be a classic case of a “value trap.”
|Best Value Consumer Discretionary Stocks|
|Price ($)||Market Cap ($B)||12-Month Trailing P/E Ratio|
|Qurate Retail Inc. (QRTEA)||8.73||3.5||3.0|
|eBay Inc. (EBAY)||73.38||45.9||4.0|
|Foot Locker Inc. (FL)||55.59||5.8||5.7|
- Qurate Retail Inc.: Qurate Retail is an e-commerce service provider. The company partners with television networks and e-commerce sites, social media, mobile applications, and similar platforms to provide video and digital commerce services worldwide. Qurate’s brands include QVC, HSN, Zulily, and Frontgate, among others.
- eBay Inc.: eBay is a global e-commerce company that connects millions of sellers and buyers in 190 global markets. eBay has 1.5 billion live listings and 159 million active buyers worldwide, allowing the company to achieve economies of networking, the benefits associated with a large network of users. On Nov. 14, eBay announced that it had sold an 80% stake in its Korean businesses for approximately $3.0 billion to South Korea-based retailer E-mart. eBay will retain a nearly 20% ownership stake in its Korean businesses.
- Foot Locker Inc.: Foot Locker is an athletic footwear and apparel retailer. It sells its products in physical stores as well as direct-to-consumers via the Internet and mobile sites as well as catalogs. For Q3 2021 ended Oct. 30, Foot Locker reported plunging net income year-over-year (YOY) as sales increased 3.9% declined. The results were hurt by ongoing supply chain challenges in Q3 compared to a robust back-to-school season in the same quarter a year earlier.
Fastest-Growing Consumer Discretionary Stocks
These are the top consumer discretionary stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one or the other figure unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of over 2,500% were excluded as outliers.
|Fastest-Growing Consumer Discretionary Stocks|
|Price ($)||Market Cap ($B)||EPS Growth (%)||Revenue Growth (%)|
|Ross Stores Inc. (ROST)||116.52||41.4||2,220||79.0|
|Choice Hotels International Inc. (CHH)||149.91||8.3||700.0||53.4|
|Marriott International Inc. (MAR)||156.72||51.0||116.1||75.1|
Source: YCharts; Driven Brands Holdings Inc.
- Ross Stores Inc.: Ross Stores operates two brands of off-price retail apparel and home accessories stores: Ross Dress for Less and dd’s DISCOUNTS. The company offers name-brand and designer apparel, accessories, footwear, and home fashions at discount prices.
- Choice Hotels International Inc.: Choice Hotels International is a franchiser of hotel properties. The company also provides vacation rental properties and other services to customers globally. Net income rose 53% on a 4% increase in revenue in Q3 2021 ended Sept. 30. Choice Hotels awarded 89 new domestic franchise agreements year-to-date though Sept. 30.
- Marriott International Inc.: Marriott International is a franchisor and operator of a global hotel chain. The company franchises lodging facilities and timesharing resorts, and also provides services for home and condominium owner associations. Net income grew by 120.0% YOY on a sharp increase in total revenues. As COVID-19 vaccines became more available globally, the company added about 17,500 rooms worldwide during Q3 2021 ended Sept. 30.
These are the consumer discretionary stocks that had the highest total return over the past 12 months.
|Consumer Discretionary Stocks with the Most Momentum|
|Price ($)||Market Cap ($B)||12-Month Trailing Total Return (%)|
|GameStop Corp. (GME)||210.00||16.1||1,710|
|Dick’s Sporting Goods Inc. (DKS)||135.02||12.0||168.2|
|Tesla Inc. (TSLA)||1,089.01||1,094||146.6|
|Russell 1000 (IWB)||N/A||N/A||33.5|
|Consumer Discretionary Select Sector SPDR ETF (XLY)||N/A||N/A||37.8|
- GameStop Corp.: GameStop operates video game and PC entertainment software stores that sell new and used hardware and software and accessories. GameStop sells its products worldwide. This year, the company’s stock has been among the most famous of the “meme stocks,” stocks that are popular among retail investors through social media.
- Dick’s Sporting Goods Inc.: Dick’s Sporting Goods is a retailer specializing in sporting goods. The company’s products include sports gear, equipment, apparel, and footwear. It serves customers across the U.S. On Nov. 3, Dick’s announced a connected partnership with Nike Inc. (NKE). Under the arrangement, customers with Dick’s Scorecard and Nike Membership accounts can shop through Dick’s mobile app. This will provide an easy-to-use platform for customers to shop for an expanded array of footwear and apparel.
- Tesla Inc.: Tesla, the world’s largest automaker by market value, is primarily engaged in the design and manufacture of electric cars, SUVs, and trucks, as well as electric vehicle powertrain components. The automaker also manufactures and installs solar energy generation and energy storage products.
The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. Though we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.