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 climbing an uphill battle and some other investments you should look into instead.
Kforce (KFRC)
Forward P/E Ratio: 13.6x
With nearly 60 years of matching skilled professionals with the right opportunities, Kforce (NYSE: KFRC) is a professional staffing company that specializes in placing technology and finance experts with businesses on both temporary and permanent bases.
Why Do We Avoid KFRC?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 9.2% annually over the last two years
- Sales were less profitable over the last two years as its earnings per share fell by 13.8% annually, worse than its revenue declines
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
At $27.92 per share, Kforce trades at 13.6x forward P/E. Dive into our free research report to see why there are better opportunities than KFRC.
Maximus (MMS)
Forward P/E Ratio: 11.5x
With nearly 50 years of experience translating public policy into operational programs that serve millions of citizens, Maximus (NYSE: MMS) provides operational services, clinical assessments, and technology solutions to government agencies in the U.S. and internationally.
Why Do We Think Twice About MMS?
- Estimated sales growth of 3.2% for the next 12 months implies demand will slow from its two-year trend
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 11.3 percentage points
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
Maximus’s stock price of $85.22 implies a valuation ratio of 11.5x forward P/E. To fully understand why you should be careful with MMS, check out our full research report (it’s free for active Edge members).
Capital One (COF)
Forward P/E Ratio: 11.6x
Starting as a credit card company in 1988 before expanding into a full-service bank, Capital One (NYSE: COF) is a financial services company that offers credit cards, auto loans, banking services, and commercial lending to consumers and businesses.
Why Are We Cautious About COF?
- Annual tangible book value per share growth of 1.3% over the last two years lagged behind its financials peers as its large balance sheet made it difficult to generate incremental capital growth
Capital One is trading at $207.61 per share, or 11.6x forward P/E. Read our free research report to see why you should think twice about including COF in your portfolio.
Stocks We Like More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out 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 183% over the last five years (as of March 31st 2025).
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. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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