Value investing has created more billionaires than any other strategy, like Warren Buffett, who built his fortune by purchasing wonderful businesses at reasonable prices. But these hidden gems are few and far between - many stocks that appear cheap often stay that way because they face structural issues.
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.
Avantor (AVTR)
Forward P/E Ratio: 14.8x
With roots dating back to 1904 and embedded in virtually every stage of scientific research and production, Avantor (NYSE: AVTR) provides mission-critical products, materials, and services to customers in biopharma, healthcare, education, and advanced technology industries.
Why Do We Think Twice About AVTR?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Forecasted revenue decline of 2.1% for the upcoming 12 months implies demand will fall even further
- Inability to adjust its cost structure while its revenue declined over the last two years led to a 3.6 percentage point drop in the company’s adjusted operating margin
At $16.17 per share, Avantor trades at 14.8x forward price-to-earnings. Check out our free in-depth research report to learn more about why AVTR doesn’t pass our bar.
Carriage Services (CSV)
Forward P/E Ratio: 12.6x
Established in 1991, Carriage Services (NYSE: CSV) is a provider of funeral and cemetery services in the United States.
Why Are We Hesitant About CSV?
- 4.5% annual revenue growth over the last two years was slower than its consumer discretionary peers
- Anticipated sales growth of 7.2% for the next year implies demand will be shaky
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its shrinking returns suggest its past profit sources are losing steam
Carriage Services is trading at $38.99 per share, or 12.6x forward price-to-earnings. To fully understand why you should be careful with CSV, check out our full research report (it’s free).
HP (HPQ)
Forward P/E Ratio: 7.7x
Born from the legendary Silicon Valley garage startup founded by Bill Hewlett and Dave Packard in 1939, HP (NYSE: HPQ) designs and sells personal computers, printers, and related technology products and services to consumers, businesses, and enterprises worldwide.
Why Should You Sell HPQ?
- Sales tumbled by 1.7% annually over the last five years, showing market trends are working against its favor during this cycle
- Projected sales growth of 3.5% for the next 12 months suggests sluggish demand
- Earnings per share have contracted by 4.6% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
HP’s stock price of $28.59 implies a valuation ratio of 7.7x forward price-to-earnings. If you’re considering HPQ for your portfolio, see our FREE research report to learn more.
Stocks We Like More
With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run - and we’re laser-focused on finding the best stocks for this upcoming cycle.
Put yourself in the driver’s seat by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.
