Value stocks typically trade at discounts to the broader market, offering patient investors the opportunity to buy businesses when they’re out of favor. The key risk, however, is that these stocks are usually cheap for a reason — five cents for a piece of fruit may seem like a great deal until you find out it’s rotten.
Identifying genuine bargains from value traps is something many investors struggle with, which is why we started StockStory - to help you find the best companies. Keeping that in mind, here are two value stocks with strong fundamentals and one facing an uphill battle.
One Value Stock to Sell:
Terex (TEX)
Forward P/E Ratio: 12.2x
With humble beginnings as a dump truck company, Terex (NYSE: TEX) today manufactures lifting and material handling equipment designed to move and hoist heavy goods and materials.
Why Are We Hesitant About TEX?
- 6.7% annual revenue growth over the last two years was slower than its industrials peers
- Revenue growth over the past two years was nullified by the company’s new share issuances as its earnings per share fell by 47.3% annually
- Eroding returns on capital suggest its historical profit centers are aging
Terex is trading at $62.03 per share, or 12.2x forward P/E. To fully understand why you should be careful with TEX, check out our full research report (it’s free).
Two Value Stocks to Watch:
Upwork (UPWK)
Forward EV/EBITDA Ratio: 3.6x
Formed through the 2013 merger of Elance and oDesk, Upwork (NASDAQ: UPWK) is an online platform where businesses and independent professionals connect to get work done.
Why Does UPWK Stand Out?
- 10.1% annual increases in its average revenue per customer over the last two years show its platform is resonating with power users
- Performance over the past three years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 239% outpaced its revenue gains
- Strong free cash flow margin of 25.8% enables it to reinvest or return capital consistently, and its improved cash conversion implies it’s becoming a less capital-intensive business
Upwork’s stock price of $8.71 implies a valuation ratio of 3.6x forward EV/EBITDA. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Brown & Brown (BRO)
Forward P/E Ratio: 12.2x
With roots dating back to 1939 and operations spanning 44 U.S. states and 14 countries, Brown & Brown (NYSE: BRO) is an insurance brokerage and risk management firm that markets and sells insurance products across property, casualty, and employee benefits sectors.
Why Is BRO a Top Pick?
- Sales outlook for the upcoming 12 months implies the business will stay on its desirable two-year growth trajectory
- Earnings per share grew by 18.5% annually over the last five years, massively outpacing its peers
- BRO is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
At $56.60 per share, Brown & Brown trades at 12.2x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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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.
