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. That said, here is one value stock offering a compelling risk-reward profile and two climbing an uphill battle.
Two Value Stocks to Sell:
MarineMax (HZO)
Forward P/E Ratio: 8.5x
Appropriately headquartered in Clearwater, Florida, MarineMax (NYSE: HZO) sells boats, yachts, and other marine products.
Why Is HZO Not Exciting?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Negative free cash flow raises questions about the return timeline for its investments
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
At $22.99 per share, MarineMax trades at 8.5x forward price-to-earnings. Check out our free in-depth research report to learn more about why HZO doesn’t pass our bar.
Edgewell Personal Care (EPC)
Forward P/E Ratio: 9.1x
Boasting brands such as Banana Boat, Schick, and Skintimate, Edgewell Personal Care (NYSE: EPC) sells personal care products in the skin and sun care, shave, and feminine care categories.
Why Should You Dump EPC?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Demand is forecasted to shrink as its estimated sales for the next 12 months are flat
- Capital intensity has ramped up over the last year as its free cash flow margin decreased by 2.7 percentage points
Edgewell Personal Care’s stock price of $29.41 implies a valuation ratio of 9.1x forward price-to-earnings. To fully understand why you should be careful with EPC, check out our full research report (it’s free).
One Value Stock to Watch:
Merck (MRK)
Forward P/E Ratio: 10.5x
With roots dating back to 1891 and a portfolio that includes the blockbuster cancer immunotherapy Keytruda, Merck (NYSE: MRK) develops and sells prescription medicines, vaccines, and animal health products across oncology, infectious diseases, cardiovascular, and other therapeutic areas.
Why Are We Positive On MRK?
- Dominant market position is represented by its $64.17 billion in revenue, which creates significant barriers to entry in this highly regulated industry
- Adjusted operating margin expanded by 14.5 percentage points over the last five years as it scaled and became more efficient
- Free cash flow margin expanded by 15.4 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
Merck is trading at $93.13 per share, or 10.5x forward price-to-earnings. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market - and we’re zeroing in on the stocks that could benefit immensely.
Take advantage of the rebound by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.
