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 three value stocks with poor fundamentals and some alternatives you should consider instead.
Atkore (ATKR)
Forward P/E Ratio: 12.4x
Protecting the things that power our world, Atkore (NYSE: ATKR) designs and manufactures electrical safety products.
Why Do We Steer Clear of ATKR?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Free cash flow margin shrank by 5.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Waning returns on capital imply its previous profit engines are losing steam
At $64.95 per share, Atkore trades at 12.4x forward P/E. Dive into our free research report to see why there are better opportunities than ATKR.
Xerox (XRX)
Forward P/E Ratio: 3.4x
Pioneering the modern office copier and inventing technologies like Ethernet and the laser printer, Xerox (NASDAQ: XRX) provides document management systems, printing technology, and workplace solutions to businesses of all sizes across the globe.
Why Should You Sell XRX?
- Sales tumbled by 2.6% annually over the last five years, showing market trends are working against its favor during this cycle
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 15.6% annually, worse than its revenue
- 8× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Xerox’s stock price of $2.77 implies a valuation ratio of 3.4x forward P/E. If you’re considering XRX for your portfolio, see our FREE research report to learn more.
Sezzle (SEZL)
Forward P/E Ratio: 12.6x
Founded in 2016 as an alternative to traditional credit cards for younger shoppers, Sezzle (NASDAQ: SEZL) provides a payment platform that allows consumers to split purchases into four interest-free installments over six weeks at participating retailers.
Why Does SEZL Give Us Pause?
- Negative return on equity shows management lost money while trying to expand the business
Sezzle is trading at $52.26 per share, or 12.6x forward P/E. To fully understand why you should be careful with SEZL, check out our full research report (it’s free for active Edge members).
High-Quality Stocks for All Market Conditions
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in 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 244% over the last five years (as of June 30, 2025).
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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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