StockStory Flags Growth and Cash-Flow Risks at Three Consumer Firms

StockStory identified Mohawk Industries, MasterCraft and Frontdoor as consumer stocks it views as risky, citing weak sales trends, cash-flow forecasts and returns on capital. The publisher noted that the consumer discretionary industry returned 3.9% over six months, trailing the S&P 500 by 17.2 percentage points.

Mohawk’s sales were flat over the past five years, StockStory said. It expects the flooring company’s free-cash-flow margin to fall by 4.4 percentage points over the next year, while returns on capital have not improved. The article listed a share price of $124.84 and a forward price-to-earnings ratio of 13.5.

MasterCraft’s revenue declined by 7.9% annually over five years, according to the article. StockStory also said its forecasted free-cash-flow margin suggests no improvement in cash conversion, and that returns on capital are eroding. It cited a price of $20.08 and a forward P/E of 10.2.

Frontdoor’s annual revenue growth averaged 6.7% over five years, slower than its consumer discretionary peers, the publisher said. Its free-cash-flow margin is expected to contract by 1.8 percentage points, while returns on capital are shrinking. The article gave a share price of $73.55 and a forward P/E of 14.7.