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.

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. That said, here are three value stocks with poor fundamentals and some alternatives you should consider instead.

Matson (MATX)

Forward P/E Ratio: 10.2x

Founded by a Swedish orphan, Matson (NYSE: MATX) is a provider of ocean transportation and logistics services.

Why Does MATX Give Us Pause?

1. Sales trends were unexciting over the last two years as its 4.3% annual growth was below the typical industrials company
2. Free cash flow margin dropped by 8.3 percentage points over the last five years, implying the company became more capital intensive as competition picked up
3. Diminishing returns on capital suggest its earlier profit pools are drying up

Matson’s stock price of $116.38 implies a valuation ratio of 10.2x forward P/E. To fully understand why you should be careful with MATX, check out our full research report (it’s free for active Edge members).

Acadia Healthcare (ACHC)

Forward P/E Ratio: 8.5x

With a network of over 250 facilities serving patients in 38 states and Puerto Rico, Acadia Healthcare (NASDAQ: ACHC) operates facilities providing mental health and substance use disorder treatment services across the United States.

Why Are We Cautious About ACHC?

1. Weak admissions over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
2. Costs have risen faster than its revenue over the last five years, causing its adjusted operating margin to decline by 5.2 percentage points
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 21.7 percentage points

Acadia Healthcare is trading at $15.52 per share, or 8.5x forward P/E. If you’re considering ACHC for your portfolio, see our FREE research report to learn more.

Ingram Micro (INGM)

Forward P/E Ratio: 6.8x

Operating as the crucial link in the global technology supply chain with a presence in 57 countries, Ingram Micro (NYSE: INGM) is a global technology distributor that connects manufacturers with resellers, providing hardware, software, cloud services, and logistics expertise.

Why Are We Wary of INGM?

1. Sizable revenue base leads to growth challenges as its 2.2% annual revenue increases over the last five years fell short of other business services companies
2. Incremental sales over the last two years were much less profitable as its earnings per share fell by 7.8% annually while its revenue grew
3. Poor free cash flow margin of -0.1% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends

At $21.69 per share, Ingram Micro trades at 6.8x forward P/E. Dive into our free research report to see why there are better opportunities than INGM.

Stocks We Like More

The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 5 Strong Momentum Stocks for this week. 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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