Rock-bottom prices don't always mean rock-bottom businesses. The stocks we're examining today have all touched their 52-week lows, creating a classic investor's dilemma: bargain opportunity or value trap?
At StockStory, we dig beneath the surface of price movements to uncover whether a company's fundamentals justify its current valuation or suggest hidden potential. Keeping that in mind, here is one stock poised to prove the bears wrong and two where the skepticism is well-placed.
Two Stocks to Sell:
J&J Snack Foods (JJSF)
One-Month Return: -1.2%
Best known for its SuperPretzel soft pretzels and ICEE frozen drinks, J&J Snack Foods (NASDAQ: JJSF) produces a range of snacks and beverages and distributes them primarily to supermarket and food service customers.
Why Does JJSF Fall Short?
- Revenue base of $1.59 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Estimated sales growth of 3.6% for the next 12 months implies demand will slow from its three-year trend
- ROIC of 6.8% reflects management’s challenges in identifying attractive investment opportunities
At $128.52 per share, J&J Snack Foods trades at 22.5x forward price-to-earnings. To fully understand why you should be careful with JJSF, check out our full research report (it’s free).
Accenture (ACN)
One-Month Return: -3.2%
With a workforce of approximately 774,000 people serving clients in more than 120 countries, Accenture (NYSE: ACN) is a professional services firm that helps organizations transform their businesses through consulting, technology, operations, and digital services.
Why Are We Hesitant About ACN?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 3.1% for the last two years
- 5.2 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Diminishing returns on capital suggest its earlier profit pools are drying up
Accenture is trading at $294.50 per share, or 22.6x forward price-to-earnings. Check out our free in-depth research report to learn more about why ACN doesn’t pass our bar.
One Stock to Buy:
Texas Roadhouse (TXRH)
One-Month Return: -5.7%
With locations often featuring Western-inspired decor, Texas Roadhouse (NASDAQ: TXRH) is an American restaurant chain specializing in Southern-style cuisine and steaks.
Why Are We Bullish on TXRH?
- Offensive push to build new restaurants and attack its untapped market opportunities is backed by its same-store sales growth
- Customers are lining up to eat at its restaurants as the company’s same-store sales growth averaged 9.1% over the past two years
- Free cash flow margin expanded by 2.7 percentage points over the last year, providing additional flexibility for investments and share buybacks/dividends
Texas Roadhouse’s stock price of $161.30 implies a valuation ratio of 22.5x forward price-to-earnings. Is now the right time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out 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 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 Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.
