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.
Cable One (CABO)
Forward P/E Ratio: 3.5x
Founded in 1986, Cable One (NYSE: CABO) provides high-speed internet, cable television, and telephone services, primarily in smaller markets across the United States.
Why Do We Think CABO Will Underperform?
- Sluggish trends in its residential data subscribers suggest customers aren’t adopting its solutions as quickly as the company hoped
- Sales are projected to tank by 4.6% over the next 12 months as its demand continues evaporating
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Cable One is trading at $131.48 per share, or 3.5x forward P/E. Check out our free in-depth research report to learn more about why CABO doesn’t pass our bar.
Lennar (LEN)
Forward P/E Ratio: 14.3x
One of the largest homebuilders in America, Lennar (NYSE: LEN) is known for constructing affordable, move-up, and retirement homes across a range of markets and communities.
Why Do We Steer Clear of LEN?
- Backlog has dropped by 19.2% on average over the past two years, suggesting it’s losing orders as competition picks up
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 15.2% annually
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 11.9 percentage points
At $122.00 per share, Lennar trades at 14.3x forward P/E. If you’re considering LEN for your portfolio, see our FREE research report to learn more.
Western Union (WU)
Forward P/E Ratio: 5.2x
With a history dating back to 1851 when it began as a telegraph company, Western Union (NYSE: WU) is a global money transfer service that enables consumers and businesses to send funds across borders and currencies, typically within minutes.
Why Should You Sell WU?
- Annual sales declines of 3.4% for the past five years show its products and services struggled to connect with the market during this cycle
- Earnings per share have contracted by 1.1% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
Western Union’s stock price of $9.15 implies a valuation ratio of 5.2x forward P/E. Dive into our free research report to see why there are better opportunities than WU.
High-Quality Stocks for All Market Conditions
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
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