Regarded as defensive investments, consumer staples stocks are generally safe bets in choppy markets. 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 -7.5% decline paled in comparison to the S&P 500’s 20% 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 poised to generate sustainable market-beating returns and two best left ignored.
Two Consumer Staples Stocks to Sell:
Kellanova (K)
Market Cap: $28.9 billion
With Corn Flakes as its first and most iconic product, Kellanova (NYSE: K) is a packaged foods company that is dominant in the cereal and snack categories.
Why Does K Fall Short?
- Flat unit sales over the past two years suggest it might have to lower prices to stimulate growth
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 2.9%
- Capital intensity has ramped up over the last year as its free cash flow margin decreased by 2.5 percentage points
At $83.23 per share, Kellanova trades at 22.4x forward P/E. Read our free research report to see why you should think twice about including K in your portfolio.
McCormick (MKC)
Market Cap: $17.13 billion
The classic red Heinz ketchup bottle’s competitor, McCormick (NYSE: MKC) sells food-flavoring products like condiments, spices, and seasoning mixes.
Why Are We Hesitant About MKC?
- Lackluster 2.1% annual revenue growth over the last three years indicates the company is losing ground to competitors
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Capital intensity has ramped up over the last year as its free cash flow margin decreased by 1.9 percentage points
McCormick’s stock price of $63.84 implies a valuation ratio of 20.5x forward P/E. Check out our free in-depth research report to learn more about why MKC doesn’t pass our bar.
One Consumer Staples Stock to Watch:
Colgate-Palmolive (CL)
Market Cap: $60.44 billion
Formed after the 1928 combination between toothpaste maker Colgate and soap maker Palmolive-Peet, Colgate-Palmolive (NYSE: CL) is a consumer products company that focuses on personal, household, and pet products.
Why Does CL Stand Out?
- Customer loyalty and massive revenue base of $20.1 billion makes it a household name that influences purchasing decisions
- Differentiated product offerings are difficult to replicate at scale and lead to a best-in-class gross margin of 60.3%
- Strong free cash flow margin of 17% enables it to reinvest or return capital consistently
Colgate-Palmolive is trading at $75.40 per share, or 2.9x forward price-to-sales. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .
Stocks We Like Even More
Fresh US-China trade tensions just tanked stocks—but strong bank earnings are fueling a sharp rebound. Don’t miss the bounce.
Don’t let fear keep you from great opportunities and take a look at Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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