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 are two value stocks offering compelling risk-reward profiles and one with little support.
One Value Stock to Sell:
Gates Industrial Corporation (GTES)
Forward P/E Ratio: 14.8x
Helping create one of the most memorable moments for the iconic “Jurassic Park” film, Gates (NYSE: GTES) offers power transmission and fluid transfer equipment for various industries.
Why Does GTES Give Us Pause?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Anticipated sales growth of 1.1% for the next year implies demand will be shaky
- Underwhelming 6.6% return on capital reflects management’s difficulties in finding profitable growth opportunities
Gates Industrial Corporation is trading at $21.49 per share, or 14.8x forward P/E. If you’re considering GTES for your portfolio, see our FREE research report to learn more.
Two Value Stocks to Watch:
Griffon (GFF)
Forward P/E Ratio: 11.7x
Initially in the defense industry, Griffon (NYSE: GFF) is a now diversified company specializing in home improvement, professional equipment, and building products.
Why Do We Like GFF?
- Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Performance over the past five years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 32.6% outpaced its revenue gains
- Free cash flow margin increased by 10 percentage points over the last five years, giving the company more capital to invest or return to shareholders
At $70.19 per share, Griffon trades at 11.7x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Royalty Pharma (RPRX)
Forward P/E Ratio: 7x
Pioneering a unique business model in the pharmaceutical industry since 1996, Royalty Pharma (NASDAQ: RPRX) acquires rights to receive portions of sales from successful biopharmaceutical products, providing funding to drug developers without conducting research itself.
Why Does RPRX Stand Out?
- Projected revenue growth of 22.4% for the next 12 months is above its two-year trend, pointing to accelerating demand
- Adjusted operating margin improved by 60 percentage points over the last two years as it eliminated redundant costs
- Free cash flow margin expanded by 28.7 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
Royalty Pharma’s stock price of $33.75 implies a valuation ratio of 7x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. 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.
