Consumer staples stocks are solid insurance policies in frothy markets ripe for corrections. The flip side is that they frequently fall behind growth industries when times are good, and this perception became a reality over the past six months as the sector was down 7.9% while the S&P 500 was up 7.9%.

Some companies can buck this trend, but the odds aren’t great for the ones we’re analyzing today. With that said, here are three consumer stocks that may face trouble.

B&G Foods (BGS)

Market Cap: $533.4 million

Started as a small grocery store in New York City, B&G Foods (NYSE:BGS) is an American packaged foods company with a diverse portfolio of more than 50 brands.

Why Do We Avoid BGS?

1. Annual revenue declines of 2% over the last three years indicate problems with its market positioning
2. Earnings per share decreased by more than its revenue over the last three years, showing each sale was less profitable
3. 7× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

At $6.74 per share, B&G Foods trades at 9.9x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than BGS.

J&J Snack Foods (JJSF)

Market Cap: $2.62 billion

Best known for its SuperPretzel soft pretzels and ICEE frozen drinks, J&J Snack Foods (NASDAQ:JJSF) produces a range of snacks and beverages and distributes them primarily to supermarket and food service customers.

Why Do We Think Twice About JJSF?

1. Subscale operations are evident in its revenue base of $1.59 billion, meaning it has fewer distribution channels than its larger rivals
2. 1.4 percentage point decline in its free cash flow margin over the last year reflects the company’s increased investments to defend its market position
3. Underwhelming 6.8% return on capital reflects management’s difficulties in finding profitable growth opportunities

J&J Snack Foods’s stock price of $134.08 implies a valuation ratio of 23.6x forward price-to-earnings. Read our free research report to see why you should think twice about including JJSF in your portfolio, it’s free.

PepsiCo (PEP)

Market Cap: $211 billion

With a history that goes back more than a century, PepsiCo (NASDAQ:PEP) is a household name in food and beverages today and best known for its flagship soda.

Why Does PEP Worry Us?

1. Falling unit sales over the past two years suggest it might have to lower prices to stimulate growth
2. Demand will likely fall over the next 12 months as Wall Street expects flat revenue
3. Free cash flow margin has shown no improvement over the last year

PepsiCo is trading at $153.88 per share, or 18.1x forward price-to-earnings. Check out our free in-depth research report to learn more about why PEP doesn’t pass our bar.

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