Value stocks typically trade at discounts to the broader market, offering patient investors the opportunity to buy businesses when they’re out of favor. The key risk, however, is that these stocks are usually cheap for a reason – five cents for a piece of fruit may seem like a great deal until you find out it’s rotten.
Separating the winners from the value traps is a tough challenge, and that’s where StockStory comes in. Our job is to find you high-quality companies that will stand the test of time. Keeping that in mind, here are three value stocks with poor fundamentals and some alternatives you should consider instead.
Wendy's (WEN)
Forward P/E Ratio: 10.6x
Founded by Dave Thomas in 1969, Wendy’s (NASDAQ: WEN) is a renowned fast-food chain known for its fresh, never-frozen beef burgers, flavorful menu options, and commitment to quality.
Why Does WEN Worry Us?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new diners into its restaurants
- Projected sales decline of 2.4% for the next 12 months points to a tough demand environment ahead
- High net-debt-to-EBITDA ratio of 7× could force the company to raise capital at unfavorable terms if market conditions deteriorate
At $9.03 per share, Wendy's trades at 10.6x forward P/E. Check out our free in-depth research report to learn more about why WEN doesn’t pass our bar.
Valley National Bank (VLY)
Forward P/B Ratio: 0.8x
Tracing its roots back to 1927 during the economic boom before the Great Depression, Valley National Bancorp (NASDAQGS:VLY) operates Valley National Bank, providing commercial, consumer, and wealth management banking services across several states.
Why Are We Wary of VLY?
- Flat sales over the last two years suggest it must find different ways to grow during this cycle
- Weak unit economics are reflected in its net interest margin of 2.9%, one of the worst among bank companies
- Sales over the last two years were less profitable as its earnings per share fell by 17% annually while its revenue was flat
Valley National Bank’s stock price of $10.56 implies a valuation ratio of 0.8x forward P/B. Read our free research report to see why you should think twice about including VLY in your portfolio.
Merchants Bancorp (MBIN)
Forward P/B Ratio: 0.8x
With a strategic focus on low-risk, government-backed lending programs, Merchants Bancorp (NASDAQCM:MBIN) is an Indiana-based bank holding company specializing in multi-family mortgage banking, mortgage warehousing, and traditional banking services.
Why Does MBIN Fall Short?
- Weak unit economics are reflected in its net interest margin of 3%, one of the worst among bank companies
- Operational productivity has decreased over the last four years as its efficiency ratio worsened by 15.3 percentage points
- Insufficient tier one capital ratio of 8.6% leaves little margin for error in meeting regulatory liquidity requirements
Merchants Bancorp is trading at $32.04 per share, or 0.8x forward P/B. To fully understand why you should be careful with MBIN, check out our full research report (it’s free for active Edge members).
Stocks We Like More
When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at Top 5 Strong Momentum 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-small-cap company Exlservice (+354% 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
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
