The performance of consumer discretionary businesses is closely linked to economic cycles. 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 8.5%. This drawdown was worse than the S&P 500’s 1.9% fall.

Investors should tread carefully as many companies in this space are also unpredictable because they lack recurring revenue business models. Taking that into account, here are three consumer stocks we’re swiping left on.

MGM Resorts (MGM)

Market Cap: $9.45 billion

Operating several properties on the Las Vegas Strip, MGM Resorts (NYSE: MGM) is a global hospitality and entertainment company known for its resorts and casinos.

Why Are We Out on MGM?

1. Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 4.2% over the last two years was below our standards for the consumer discretionary sector
2. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
3. High net-debt-to-EBITDA ratio of 12× could force the company to raise capital at unfavorable terms if market conditions deteriorate

MGM Resorts is trading at $37.04 per share, or 19.1x forward P/E. Read our free research report to see why you should think twice about including MGM in your portfolio.

PENN Entertainment (PENN)

Market Cap: $1.83 billion

Established in 1982, PENN Entertainment (NASDAQ: PENN) is a diversified American operator of casinos, sports betting, and entertainment venues.

Why Do We Think PENN Will Underperform?

1. Lackluster 14.2% annual revenue growth over the last five years indicates the company is losing ground to competitors
2. Cash-burning history makes us doubt the long-term viability of its business model
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

At $14.11 per share, PENN Entertainment trades at 14.3x forward P/E. If you’re considering PENN for your portfolio, see our FREE research report to learn more.

Target Hospitality (TH)

Market Cap: $926.4 million

Building mini-communities at places such as oil drilling sites, Target Hospitality (NASDAQ: TH) is a provider of specialty workforce lodging accommodations and services.

Why Should You Sell TH?

1. 7.3% annual revenue growth over the last five years was slower than its consumer discretionary peers
2. Earnings per share fell by 3.7% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

Target Hospitality’s stock price of $9.25 implies a valuation ratio of 14.1x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why TH doesn’t pass our bar.

Stocks We Like More

WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.

But our AI platform says the party isn't over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.