The Best Consumer Cyclical Stocks to Buy

Consumer cyclical stocks are typically popular with investors when the economy is growing because that’s when consumers are more likely to spend money on discretionary items. Conversely, investors are usually less interested during economic slowdowns and recessions, when consumers spend less.

Over the past 12 months, the Morningstar US Consumer Cyclical Index fell 0.08%, while the Morningstar US Market Index gained 12.90%.

The 7 Best Consumer Cyclical Stocks to Buy Now

These were the most undervalued consumer cyclical stocks that Morningstar’s analysts cover as of Feb. 17, 2026.

1. Adient ADNT
2. CarMax KMX
3. Bath & Body Works BBWI
4. Flutter Entertainment FLUT
5. DraftKings DKNG
6. Sea SE
7. Gentex GNTX

To come up with our list of the best consumer cyclical stocks to buy now, we screened for:

• Consumer cyclical stocks that are undervalued, as measured by our price/fair value metric.
• Stocks that earn narrow or wide Morningstar Economic Moat Ratings. We think companies with narrow economic moat ratings can fight off competitors for at least 10 years; wide-moat companies should remain competitive for 20 years or more.
• Stocks that earn a Low, Medium, High, or Very High Morningstar Uncertainty Rating, which captures the range of potential outcomes for a company’s fair value.

Here’s a little more about each of the best consumer cyclical stocks to buy, including commentary from the Morningstar analysts who cover each company. All data is as of Feb. 17, 2026.

Adient

• Morningstar Price/Fair Value: 0.39
• Morningstar Uncertainty Rating: Very High
• Morningstar Economic Moat Rating: Narrow
• Industry: Auto Parts

Auto-parts firm Adient is the most affordable stock on our list of the best consumer cyclical stocks to buy. Adient began trading Oct. 31, 2016, when Johnson Controls spun off its automotive experience segment. The stock is trading 61% below our fair value estimate of $67 per share.

Adient is the automotive seating business of Johnson Controls that was spun off to JCI shareholders in a taxable transaction on Oct. 31, 2016. Adient is a top-two player in the seating market with midteens share globally. We think ignoring Adient just because it is an auto-parts supplier is shortsighted. Seating is one of the stickiest parts of the supplier sector since it is very difficult to take out an incumbent on a vehicle program, and automakers need suppliers that can consistently deliver high-quality seats in a just-in-time system throughout the world. Automakers have global platforms and are willing to pay for the right supplier rather than the lowest price supplier. We think the seating sector can benefit from autonomous and electric vehicles rather than be hurt by the change because AVs and EVs open up new seating configurations and possibly more electronics content in seats.

We think some investors may need to reframe their perspective on the seating and auto suppliers space by understanding that seating is not a commodity product and that firms such as Adient have a narrow economic moat with maintainable competitive advantages from three moat sources: intangible assets, switching costs, and cost advantage. It is normal in the seating space, for example, that an incumbent supplier gets the next generation of a vehicle program nearly 100% of the time, so business is very sticky. When a seating supplier loses a contract, it’s usually to Adient or rival Lear, the two biggest players.

At the end of fiscal 2021, Adient consolidated some of its Chinese seating joint ventures so it can pursue business with more Japanese, German, and startup electric vehicle firms in China. We think the company can increase operating margin including equity income over the next several years by restructuring its operations to be a better manufacturer, and the joint venture sales brought good cash flow to reduce debt. For patient investors who can wait for the company to restructure and poor metals contracts to expire in fiscal 2026 and fiscal 2027, we see Adient as a good turnaround story with improving free cash flow generation and occasional share repurchases.

Read more about Adient here.

CarMax

• Morningstar Price/Fair Value: 0.43
• Morningstar Uncertainty Rating: High
• Morningstar Economic Moat Rating: Narrow
• Industry: Auto & Truck Dealerships

CarMax sells, finances, and services used and new cars through a chain of over 250 used retail stores. Trading 57% below our fair value estimate, CarMax has an economic moat rating of narrow. We think shares of this stock are worth $99 per share.

CarMax’s revenue has grown at a compound annual rate of 10.8% since fiscal 2000 from customer-friendly sales practices and use of technology. We think the firm will eventually reach its over 5% zero to 10-year-old vehicle market share target, up from 3.7% in calendar 2023 and 2024. However, goals of $33 billion in revenue and selling a combined 2 million annual retail and auction units may change with a new CEO.

Competing dealerships have tried no-haggle pricing and failed because their salesforces are trained to focus on selling vehicles that earn the highest possible gross profit rather than vehicles that customers actually want or need. A traditional dealership relies on profits from service to offset the typically lower margins it gets on new-vehicle sales. CarMax does not hire salespeople from the auto industry, and salespeople receive the same commission regardless of the vehicle sold. They do not even know the profit on the vehicle sold. The CarMax customer stays with the same salesperson throughout the transaction rather than being passed off to a finance department, receiving a buying experience that is hard to match at a dealership. This focus on customer satisfaction, combined with scale advantages, a wide inventory selection, and extensive pricing data, creates a narrow economic moat.

Management in the past repeatedly said that it will give improvements in operating expenses back to the customer as a price decrease instead of seeking higher gross margins. We like this strategy though it may change in fiscal 2027 with a new CEO from outside the auto retailing space. CarMax’s scale allows it to price below smaller dealerships, and lowering prices should increase comparable-store sales long term. The company can often make up any lost margin via its highly profitable finance arm, CarMax Auto Finance. CAF finances over 40% of unit sales. The company’s omnichannel program, which in fiscal 2025 made up 66% of the nearly 800,000 retail units sold, enables consumers to shop in any combination of digital and in store that they like and should allow for fewer store openings over time. These factors should keep the company growing despite more competition.

Read more about CarMax here.

Bath & Body Works

• Morningstar Price/Fair Value: 0.44
• Morningstar Uncertainty Rating: High
• Morningstar Economic Moat Rating: Narrow
• Industry: Specialty Retail

Next on our list of the best consumer cyclical stocks to buy is Bath & Body Works. Bath & Body Works is a specialty home fragrance and fragrant body care retailer operating under the Bath & Body Works, C.O. Bigelow, and White Barn brands. The stock is trading at a 56% discount to our fair value estimate of $56 per share.

Under new leadership, Bath & Body Works is pursuing an extensive turnaround plan to restore customer engagement and elevate its brand intangible asset, the basis of our narrow-moat rating. Despite weak recent demand trends, Bath & Body Works has carved out a competitive edge in the sizable addressable markets in which it operates, evidenced by its leading market share position in bath and shower and candle air freshener industries, which has facilitated by BBW’s evolving response to consumer trends. Quantitatively, its moat is reinforced by a 32% average return on invested capital including goodwill that we expect the firm to generate over the next decade, well ahead of our 8% weighted average cost of capital estimate.

Outside of the $13.3 billion bath and shower and roughly $700 million hand sanitizer markets in North America (Euromonitor), we think the beauty and other category adjacencies still offer a plethora of upside over time relative to BBW’s 2024 sales of $7.3 billion. The firm has outlined a compelling pipeline of opportunities to reach new consumers and stimulate sales conversion ahead. For example, not only can BBW add expansion products like lip and men’s care, but it can also expand its exposure to new distribution channels like Amazon and other marketplaces.

This pipeline of opportunities should support average sales growth of 1% over fiscal 2025-29 (including a 2% decline in 2025). We forecast sales of $7.75 billion in 2029, which is contingent on average sales growth of 1% from North American stores, 2% from the digital channel, and 5% from international opportunities. This should be bolstered by the reinvigoration of the brand in 2026, as BBW refocuses on its core lines and invests heavily in restoring cultural resonance. Longer term, operating margins should remain in the high teens (versus a 15% estimate in 2025) as the firm focuses on elevating the customer experience. With consumer spending continuing to center around experiences, BBW should see a resumption of demand growth ahead, with our forecast for sales just below the 3.5% growth projection for the North American mass beauty and personal care industry during 2026-29.

Read more about Bath & Body Works here.

Flutter Entertainment

• Morningstar Price/Fair Value: 0.45
• Morningstar Uncertainty Rating: High
• Morningstar Economic Moat Rating: Narrow
• Industry: Gambling

In 2016, Irish company Paddy Power merged with UK firm Betfair to form online gaming operator Flutter Entertainment. The firm earns a narrow economic moat rating, and the shares of its stock look 55% undervalued relative to our $278 fair value estimate.

With the apparent support of the US administration, predictive sports betting has emerged as both a growth opportunity and competition to traditional sports betting platforms. While we see prediction platforms amassing 3% of the US online gaming market by 2030, we don’t think Flutter’s 26% sales share will change much, as it launches predictive events in states where sports bets aren’t legal and offers its superior online sports product (parlays and in-game play). However, we suspect this shift could elevate near-term costs for Flutter and peers in the fight for share in an increasingly uncertain and competitive landscape.

We think Flutter Entertainment’s advantaged global brand, the source of its narrow moat, will remain intact due to its leading technology and product offering.

In the US, Flutter has extended its leading daily fantasy sports position, established in 2009, into the top position in the US sports betting and i-gaming market. While sports betting and i-gaming are currently legal in about 40 and seven states, respectively, we expect another handful to be added to each market in the next few years as governments look to capitalize on tax revenue generated from the growing activity, which is benefiting from improved product (parlay and in-play wagering) and technology (risk management and customized content) offerings across the industry. We estimate the US sports betting and i-gaming market will reach $50 billion in revenue by 2028 from $23 billion in 2024.

Outside the US, Flutter holds the leading revenue share in the UK, Australia, and emerging gaming regions like Italy, thanks to in-house technology that was developed decades before the competition, which allows for superior risk management, marketing efficiency, and product offerings.

We believe Flutter will be able to manage an ever-changing regulatory and competitive landscape. It maintains strong EBITDA margins internationally, despite stringent regulation and industry maturation. Meanwhile, Flutter’s US brand, FanDuel, expanded its EBITDA margin to 8.7% in 2024 from 5.3% in 2023, even as Fanatics and ESPN have entered the market and invested meaningful capital.

Read more about Flutter Entertainment here.

DraftKings

• Morningstar Price/Fair Value: 0.48
• Morningstar Uncertainty Rating: High
• Morningstar Economic Moat Rating: Narrow
• Industry: Gambling

DraftKings got its start in 2012 as an innovator in daily fantasy sports. The firm earns a narrow economic moat rating, and the shares of its stock look 52% undervalued relative to our $47 fair value estimate.

Despite ongoing competition from peers, the emergence of predictive sports betting, and the threat of heightened regulation, we think DraftKings’ technology and product offering produce a brand advantage, the source of its narrow moat. DraftKings’ in-house technology platform (acquired in 2020) allows more control in leveraging customer data and launching new products. The company’s strong financial profile should afford it latitude to invest more resources in its brand. One instance of DraftKings’ product prowess is extending its leading daily fantasy sports position, first established in 2012, into one of the top positions in the North American sports betting and i-gaming market. This top share position has also been buoyed by launching parlay and in-game play ahead of its competitors.

We see DraftKings’ leading US online gaming positioning lasting despite competition and the potential for more stringent regulation. Our stance is supported by DraftKings’ maintaining a top revenue share despite Fanatics/PointsBet and ESPN Bet’s US sports betting launches in 2023 and the emergence of prediction sports event betting in 2025. Further, we see DraftKings’ financial standing continuing to improve amid regulatory changes, which can include states changing tax rates, delaying legalization, and limiting market access. Although UK and Australia gaming markets are mature and face severe regulation, scale leaders there like Flutter have continued to produce strong revenue share and profitability, providing confidence in DraftKings’ ability to do so in the US over the next 10 years.

While sports betting and i-gaming are currently legal in around 40 and seven states, respectively, we expect another handful to be added to each market in the next few years as governments look to capitalize on tax revenue generated from the growing activity, which is benefiting from an improved product (parlay and in-play wagering) and technology (customized content) offering across the industry. As a result, we estimate the North American sports betting and i-gaming market will reach more than $50 billion in revenue by 2028 from over $22 billion in 2024.

Read more about DraftKings here.

Sea

• Morningstar Price/Fair Value: 0.55
• Morningstar Uncertainty Rating: High
• Morningstar Economic Moat Rating: Narrow
• Industry: Internet Retail

Sea started as a gaming business, Garena, but in 2015 expanded into e-commerce. Trading 45% below our fair value estimate, Sea has an economic moat rating of narrow. We think shares of this stock are worth $198 per share.

We expect Shopee to be Sea’s main valuation driver for the long term. E-commerce as a percentage of retail sales was 4%-29% in major Southeast Asian economies as of August 2025 as per eMarketer, behind China’s 52% and the UK’s 31%, leaving ample room for incumbents and new entrants to expand. We assume Shopee’s gross merchandise volume in Southeast Asia, Taiwan, and Latin America to grow at 16% CAGR during 2025-34.

Shopee has built leading GMV share quickly using subsidies, free shipping, incentives, and gamification, but during the process, it also incurred heavy cash burn. It has improved its financial position over time and is now in a net cash position as of November 2025.

To increase its competitiveness, Shopee is improving its logistics speed and coverage, as well as cost efficiency. To reduce capital expenditures, it mainly rents logistics hubs, sorting centers, and trucks. This has helped extend its last-mile coverage. It also launched a membership program to enhance user loyalty.

In response to TikTok’s competition, Shopee invested in its live streaming shopping ecosystem by cultivating users’ habits to view and shop and enhancing sellers’ and multichannel networks’ capability to produce good content, especially in its core categories of fashion, health, and beauty where margins are higher.

Bain, Google, and Temasek estimate that Southeast Asia digital payments and digital lending will grow at over 13% and 17% CAGR, respectively, from 2024 to 2030. The estimated 50%-70% unbanked and underbanked population in Southeast Asia provides ample opportunities for SeaMoney’s digital payments and loan businesses to expand. In our view, SeaMoney can leverage proprietary user behavior data on Shopee to better control credit risk.

Meanwhile, its cash cow gaming business, Garena, is focusing on continuously improving Free Fire, its dominant revenue contributor. We do not think Garena plans to spend a lot of capital developing new games due to the “hit or miss” nature of the industry.

Read more about Sea here.

Gentex

• Morningstar Price/Fair Value: 0.59
• Morningstar Uncertainty Rating: Medium
• Morningstar Economic Moat Rating: Narrow
• Industry: Auto Parts

Auto-parts firm Gentex rounds out our list of best consumer cyclical stocks to buy. Gentex was founded in 1974 to produce smoke-detection equipment. The stock is 41% undervalued relative to our fair value estimate of $42 per share.

Gentex manufactures auto-dimming interior and exterior electrochromic mirrors. These mirrors automatically darken to eliminate headlight glare for drivers and have many other applications. With over 2,300 patents worldwide, some valid through 2046, and over 85% market share, up from 77% in 2003, Gentex has a narrow economic moat that it should be able to protect for a long time, in our opinion.

The growth prospects for auto-dimming mirrors look strong. We estimate that in 2024, about 34% of all light vehicles produced had interior auto-dimming mirrors, and exterior auto-dimming penetration is roughly half that of interior. Demand remains healthy, with annual revenue growth often exceeding industry vehicle production growth. Growth will come from increased vehicle penetration as more automakers make the safety benefit of auto-dimming technology available, Gentex’s research leads to new, advanced-feature mirrors that ultimately become standard products, and markets beyond autos, such as healthcare, home connectivity, aviation, and the 2025 VOXX acquisition, bring audio equipment.

Active safety is a very fast-growing field, so more camera products are likely to show up in other vehicle programs, and Gentex develops its own cameras. A recent example is the full-display mirror, which the driver can toggle between a normal auto-dimming mirror and a display image while driving at high speed. Other growth areas include biometrics in mirrors and nanofiber chemical sensing technology, which we see having application in autonomous ride hailing, dimmable sunroofs, and universal toll payments. Gentex also owns HomeLink, an in-vehicle connectivity system linking the vehicle to one’s residence for garage or Internet of Things applications.

The future beyond autos (98% of revenue) looks bright to us, too. The company supplies auto-dimming passenger windows for the Boeing 787, 777X, and the Airbus A350. Gentex is also exploring healthcare smart lighting applications with the Mayo Clinic, movable lighting in airplane passenger cabins, nanofiber sensing that could have security uses outside of the auto industry, and using its camera technology to help the visually impaired.

Read more about Gentex here.

How to Find More of the Best Consumer Cyclical Stocks to Buy

Investors who’d like to extend their search for top consumer cyclical stocks can do the following:

• Review Morningstar’s comprehensive list of consumer cyclical stocks to investigate further.
• Stay up to date on the consumer cyclical sector’s performance, key earnings reports, and more with Morningstar’s consumer cyclical sector page.
• Read Morningstar’s Guide to Stock Investing to learn how our approach to investing can inform your stock-picking process.
• Use the Morningstar Investor screener to build a shortlist of consumer cyclical stocks to research and watch.