The low valuation multiples for value stocks provide a margin of safety that growth stocks rarely offer. However, the challenge lies in determining whether these cheap assets are genuinely undervalued or simply on sale due to their potentially deteriorating business models.
This distinction between true value and value traps can challenge even the most skilled investors. Luckily for you, we started StockStory to help you uncover exceptional companies. Keeping that in mind, here are two value stocks offering compelling risk-reward profiles and one facing an uphill battle.
One Value Stock to Sell:
PayPal (PYPL)
Forward P/E Ratio: 7.6x
Originally spun off from eBay in 2015 after being acquired by the auction giant in 2002, PayPal (NASDAQ: PYPL) operates a global digital payments platform that enables consumers and merchants to send, receive, and process payments online and in person.
Why Are We Cautious About PYPL?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 5.3% over the last two years was below our standards for the financials sector
- Performance over the past two years shows its incremental sales were less profitable, as its 2.8% annual earnings per share growth trailed its revenue gains
PayPal’s stock price of $41.57 implies a valuation ratio of 7.6x forward P/E. Read our free research report to see why you should think twice about including PYPL in your portfolio.
Two Value Stocks to Watch:
HubSpot (HUBS)
Forward P/S Ratio: 2.6x
Born from the idea that traditional interruptive marketing was becoming less effective, HubSpot (NYSE: HUBS) provides an integrated platform that helps businesses attract, engage, and manage customer relationships through marketing, sales, service, and content management tools.
Why Are We Fans of HUBS?
- Average billings growth of 22.3% over the last year enhances its liquidity and shows there is steady demand for its products
- Superior software functionality and low servicing costs are reflected in its premier gross margin of 83.7%
- Software platform has product-market fit given the rapid recovery of its customer acquisition costs
At $188.50 per share, HubSpot trades at 2.6x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free.
MediaAlpha (MAX)
Forward P/E Ratio: 7.1x
Powering nearly 10 million consumer referrals each month in the insurance marketplace, MediaAlpha (NYSE: MAX) operates a technology platform that connects insurance carriers with high-intent consumers shopping for property, casualty, health, and life insurance products.
Why Does MAX Stand Out?
- Annual revenue growth of 69.6% over the past two years was outstanding, reflecting market share gains this cycle
- Sales outlook for the upcoming 12 months implies the business will stay on its desirable two-year growth trajectory
- Earnings per share grew by 410% annually over the last two years, massively outpacing its peers
MediaAlpha is trading at $9.46 per share, or 7.1x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
