Companies in the consumer discretionary sector sell goods and services that are considered non-essential, 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 their discretionary purchases when times are tough. By contrast, companies in the consumer staples sector focus on essential items such as food and beverages.

Consumer discretionary stocks, as represented by the Consumer Discretionary Select Sector SPDR ETF (XLY), have significantly outperformed the broader market, providing investors with a total return of 30.7% compared to the Russell 1000's total return of 20.6% over the past 12 months. These performance figures are as of December 16, and all data below are as of December 17.

Here are the top 3 consumer discretionary stocks with the best value, the fastest earnings growth, and the most momentum.

Best Value Consumer Discretionary Stocks

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.

Best Value Consumer Discretionary Stocks

 

Price ($) Market Cap ($B) 12-Month Trailing P/E Ratio
Ardagh Group SA (ARD) 17.58 4.2 2.8
Qurate Retail Inc. (QRTEA) 10.52 4.4 6.6
eBay Inc. (EBAY) 53.65 37.0 7.5

Source: YCharts

  • Ardagh Group SA: Ardagh Group is a Luxembourg-based manufacturer of containers and packaging products. Ardagh produces glass and metal packaging for beverages, vegetables, oils, condiments, pet food, and a variety of other consumer products for global customers.
  • 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 outlets to provide video and digital commerce services worldwide. Qurate operates brands including QVC, HSN, zulily, and Frontgate, among others.
  • eBay Inc.: eBay is a global e-commerce company that connects buyers and sellers from different countries throughout the world. The company offers marketplaces for online auctions and classified ads. On October 28, eBay reported robust revenue and net income growth for Q3 2020.

Fastest Growing Consumer Discretionary Stocks

These are the consumer discretionary stocks with the highest YOY earnings per share (EPS) growth the most recent quarter. Rising earnings show that a company’s business is growing and is generating more money that it can reinvest or return to shareholders.

Fastest Growing Consumer Discretionary Stocks

 

Price ($) Market Cap ($B) EPS Growth (%)
Tapestry Inc. (TPR) 29.67 8.2 1,090
Etsy Inc. (ETSY) 182.34 23.0 483.3
Ford Motor Co. (F) 9.04 36.0 445.5

Source: YCharts

  • Tapestry Inc.: Tapestry is a clothing and accessories company. The company designs and manufactures handbags, footwear, jewelry, scarves, travel accessories, and related products. In its most recent quarter, Tapestry reported a more than 11-fold increase in net income in spite of declining net sales for its Q1 FY 2021 quarter ended September 26. One reason for the favorable impact on net income was tax benefits related to the Coronavirus Aid, Relief and Economic Security (“CARES”) Act.
  • Etsy Inc.: Etsy is an e-commerce company offering handmade and vintage items as well as art, supplies, clothing, housewares, paper goods, and related products. The company caters to customers in the U.S.
  • Ford Motor Co.: Ford Motor is a designer and manufacturer of cars and trucks. The company also provides vehicle servicing, financing, leasing, and insurance. Ford reported that total sales (including trucks, SUVs, and cars) for the month of November were down by 20.9% YOY. Ford said the declines were caused largely by lower inventories and consumers sheltering at home amid the pandemic.

Consumer Discretionary Stocks with the Most Momentum

These are the consumer discretionary stocks that had the highest total return over the last 12 months.

Consumer Discretionary Stocks with the Most Momentum

 

Price ($) Market Cap ($B) 12-Month Trailing Total Return (%)
Tesla Inc. (TSLA) 622.77 590.3 716.2
Peloton Interactive Inc. (PTON) 134.00 39.2 327.6
Etsy Inc. (ETSY) 182.34 23.0 323.1
Russell 1000 N/A N/A 20.6
Consumer Discretionary Select Sector SPDR ETF (XLY) N/A N/A 30.7

Source: YCharts

  • Tesla Inc.: Tesla mainly designs, builds, and sells electric vehicles and electric vehicle powertrain parts. Tesla sells vehicles directly to consumers. In 2020, Tesla has become the world's largest automaker by market value. Tesla this fall was selected to be a component of the S&P 500 index. It started trading as an S&P 500 component on December 21.
  • Peloton Interactive Inc.: Peloton Interactive sells workout bikes for indoor use and other recreational services and products. The company caters to customers in the U.S. In response to increasing demand, Peloton announced in December that it will expand its Plano, Texas campus by more than 100,000 square feet. The expansion will allow the company to further grow its business, and Peloton expects it will create approximately 1,600 new jobs.
  • Etsy Inc.: See company description above.

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