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 climbing an uphill battle and some other investments you should look into instead.
PubMatic (PUBM)
Forward P/S Ratio: 1.9x
Founded in 2006 as an online ad platform helping ad sellers, Pubmatic (NASDAQ: PUBM) is a fully integrated cloud-based programmatic advertising platform.
Why Do We Steer Clear of PUBM?
- Annual revenue growth of 6.6% over the last three years was well below our standards for the software sector
- Estimated sales growth of 4.3% for the next 12 months implies demand will slow from its three-year trend
- Gross margin of 64.9% is below its competitors, leaving less money to invest in areas like marketing and R&D
PubMatic’s stock price of $11.60 implies a valuation ratio of 1.9x forward price-to-sales. Read our free research report to see why you should think twice about including PUBM in your portfolio.
Brunswick (BC)
Forward P/E Ratio: 11.9x
Formerly known as Brunswick-Balke-Collender Company, Brunswick (NYSE: BC) is a designer and manufacturer of recreational marine products, including boats, engines, and marine parts.
Why Are We Out on BC?
- Annual sales declines of 13.8% for the past two years show its products and services struggled to connect with the market
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 2.8 percentage points
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Brunswick is trading at $52.16 per share, or 11.9x forward P/E. Dive into our free research report to see why there are better opportunities than BC.
Hillenbrand (HI)
Forward P/E Ratio: 8.8x
Hillenbrand, Inc. (NYSE: HI) is an industrial company that designs, manufactures, and sells highly engineered processing equipment and solutions for various industries.
Why Is HI Risky?
- 7.2% annual revenue growth over the last five years was slower than its industrials peers
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 5.9% annually
- Free cash flow margin dropped by 14.7 percentage points over the last five years, implying the company became more capital intensive as competition picked up
At $22.56 per share, Hillenbrand trades at 8.8x forward P/E. To fully understand why you should be careful with HI, check out our full research report (it’s free).
Stocks We Like More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.
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 Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.