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.
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 is one value stock trading at a big discount to its intrinsic value and two with little support.
Two Value Stocks to Sell:
DaVita (DVA)
Forward P/E Ratio: 10x
With over 2,600 dialysis centers across the United States and a presence in 13 countries, DaVita (NYSE: DVA) operates a network of dialysis centers providing treatment and care for patients with chronic kidney disease and end-stage kidney disease.
Why Is DVA Not Exciting?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 2.9% for the last five years
- Flat treatments over the past two years suggest it might have to lower prices to accelerate growth
- Estimated sales growth of 3.3% for the next 12 months implies demand will slow from its two-year trend
DaVita is trading at $120.50 per share, or 10x forward P/E. Check out our free in-depth research report to learn more about why DVA doesn’t pass our bar.
FirstSun Capital Bancorp (FSUN)
Forward P/B Ratio: 0.8x
Tracing its roots back to 1892 when it first opened its doors in Kansas, FirstSun Capital Bancorp (NASDAQ: FSUN) operates Sunflower Bank, providing commercial and consumer banking services to businesses and individuals across the Southwest region.
Why Do We Think Twice About FSUN?
- Sales trends were unexciting over the last two years as its 2.9% annual growth was below the typical banking company
- Net interest margin shrank by 22.3 basis points (100 basis points = 1 percentage point) over the last two years, suggesting the profitability of its loan book is decreasing or the market is becoming more competitive
- Estimated tangible book value per share decline of 2.7% for the next 12 months implies a challenging profitability environment
At $33.17 per share, FirstSun Capital Bancorp trades at 0.8x forward P/B. Read our free research report to see why you should think twice about including FSUN in your portfolio.
One Value Stock to Buy:
Blue Bird (BLBD)
Forward P/E Ratio: 12.4x
With around a century of experience, Blue Bird (NASDAQ: BLBD) is a manufacturer of school buses and complementary parts.
Why Will BLBD Outperform?
- Impressive 14.3% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 317% outpaced its revenue gains
- Rising returns on capital show management is finding more attractive investment opportunities
Blue Bird’s stock price of $52 implies a valuation ratio of 12.4x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
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