Consumer staples are considered safe havens in turbulent markets due to their inelastic demand profiles. On the other hand, they usually underperform during bull runs, and this paradigm has rung true over the past six months as the sector’s -4.4% decline paled in comparison to the S&P 500’s 9% gain.

Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. On that note, here is one consumer stock boasting a durable advantage and two we’re passing on.

Two Consumer Staples Stocks to Sell:

Flowers Foods (FLO)

Market Cap: $4.02 billion

With Wonder Bread as its premier brand, Flower Foods (NYSE:FLO) is a packaged foods company that focuses on bakery products such as breads, buns, and cakes.

Why Are We Hesitant About FLO?

1. Declining unit sales over the past two years suggest it might have to lower prices to stimulate growth
2. Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
3. Earnings growth underperformed the sector average over the last three years as its EPS grew by just 1.2% annually

Flowers Foods’s stock price of $18.76 implies a valuation ratio of 14.6x forward price-to-earnings. Check out our free in-depth research report to learn more about why FLO doesn’t pass our bar.

TreeHouse Foods (THS)

Market Cap: $1.53 billion

Whether it be packaged crackers, broths, or beverages, Treehouse Foods (NYSE:THS) produces a wide range of private-label foods for grocery and food service customers.

Why Are We Out on THS?

1. Shrinking unit sales over the past two years show it’s struggled to move its products and had to rely on price increases
2. Easily substituted products (and therefore stiff competition) result in an inferior gross margin of 16.8% that must be offset through higher volumes
3. ROIC of 1.6% reflects management’s challenges in identifying attractive investment opportunities

TreeHouse Foods is trading at $30.81 per share, or 12.8x forward price-to-earnings. Read our free research report to see why you should think twice about including THS in your portfolio, it’s free.

One Consumer Staples Stock to Watch:

Cal-Maine (CALM)

Market Cap: $4.42 billion

Known for brands such as Egg-Land’s Best and Land O’ Lakes, Cal-Maine (NASDAQ:CALM) produces, packages, and distributes eggs.

Why Could CALM Be a Winner?

1. Annual revenue growth of 29.6% over the past three years has been outstanding, reflecting market share gains
2. Earnings per share grew by 341% annually over the last three years and trumped its peers
3. Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends

At $89.99 per share, Cal-Maine trades at 10.8x forward price-to-earnings. Is now the time to initiate a position? Find out in our full research report, it’s free.

Stocks We Like Even More

With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run - and we’re laser-focused on finding the best stocks for this upcoming cycle.

Put yourself in the driver’s seat by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.