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.
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 three value stocks with little support and some other investments you should consider instead.
MarineMax (HZO)
Forward P/E Ratio: 15.8x
Appropriately headquartered in Clearwater, Florida, MarineMax (NYSE: HZO) sells boats, yachts, and other marine products.
Why Does HZO Fall Short?
- Ongoing store closures and lackluster same-store sales indicate sluggish demand and a focus on consolidation
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
MarineMax’s stock price of $25.04 implies a valuation ratio of 15.8x forward P/E. If you’re considering HZO for your portfolio, see our FREE research report to learn more.
Enact Holdings (ACT)
Forward P/B Ratio: 1x
Playing a critical role in helping first-time homebuyers access the housing market, Enact Holdings (NASDAQ: ACT) provides private mortgage insurance that enables lenders to offer home loans with lower down payments while protecting against borrower defaults.
Why Do We Think Twice About ACT?
- Net premiums earned expanded by 1.3% annually over the last five years, falling below our expectations for the insurance sector
- Day-to-day expenses have swelled relative to revenue over the last two years as its combined ratio increased by 15 percentage points
- Annual earnings per share growth of 2.9% underperformed its revenue over the last two years, showing its incremental sales were less profitable
At $35.57 per share, Enact Holdings trades at 1x forward P/B. To fully understand why you should be careful with ACT, check out our full research report (it’s free for active Edge members).
Hercules Capital (HTGC)
Forward P/E Ratio: 8.7x
Named after the mythological hero known for his strength, Hercules Capital (NYSE: HTGC) is a business development company that provides debt financing to venture capital-backed and growth-stage technology and life sciences companies.
Why Is HTGC Not Exciting?
- Incremental sales over the last two years were less profitable as its 2.1% annual earnings per share growth lagged its revenue gains
Hercules Capital is trading at $17.20 per share, or 8.7x forward P/E. Read our free research report to see why you should think twice about including HTGC in your portfolio.
High-Quality Stocks for All Market Conditions
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