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 little support and some other investments you should consider instead.
8x8 (EGHT)
Forward P/S Ratio: 0.4x
Founded in 1987, 8x8 (NYSE: EGHT) provides software for organizations to efficiently communicate and collaborate with their customers, employees, and partners.
Why Should You Sell EGHT?
- Products, pricing, or go-to-market strategy need some adjustments as its billings have averaged 2.1% declines over the last year
- Demand is forecasted to shrink as its estimated sales for the next 12 months are flat
- Extended payback periods on sales investments suggest the company’s platform isn’t resonating enough to drive efficient sales conversions
At $2.16 per share, 8x8 trades at 0.4x forward price-to-sales. Check out our free in-depth research report to learn more about why EGHT doesn’t pass our bar.
TreeHouse Foods (THS)
Forward P/E Ratio: 11.1x
Whether it be packaged crackers, broths, or beverages, Treehouse Foods (NYSE: THS) produces a wide range of private-label foods for grocery and food service customers.
Why Do We Steer Clear of THS?
- Shrinking unit sales over the past two years suggest it might have to lower prices to stimulate growth
- Gross margin of 16.8% is an output of its commoditized products
- ROIC of 1.6% reflects management’s challenges in identifying attractive investment opportunities
TreeHouse Foods’s stock price of $26.35 implies a valuation ratio of 11.1x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than THS.
Delta Air Lines (DAL)
Forward P/E Ratio: 6.3x
One of the ‘Big Four’ airlines in the US, Delta Air Lines (NYSE: DAL) is a major global air carrier that serves both business and leisure travelers through its domestic and international flights.
Why Do We Avoid DAL?
- Number of revenue passenger miles has disappointed over the past two years, indicating weak demand for its offerings
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 6.1% annually
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
Delta Air Lines is trading at $47.92 per share, or 6.3x forward price-to-earnings. To fully understand why you should be careful with DAL, check out our full research report (it’s free).
Stocks We Like More
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