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.
RingCentral (RNG)
Forward P/S Ratio: 0.9x
Founded in 1999 during the dot-com era, RingCentral (NYSE: RNG) provides software as a service that unifies phone, text, fax, video calls and chat in one platform.
Why Are We Wary of RNG?
- Offerings struggled to generate meaningful interest as its average billings growth of 6.7% over the last year did not impress
- Estimated sales growth of 4.9% for the next 12 months implies demand will slow from its three-year trend
- Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment
RingCentral is trading at $26.69 per share, or 0.9x forward price-to-sales. Read our free research report to see why you should think twice about including RNG in your portfolio.
Tri Pointe Homes (TPH)
Forward P/E Ratio: 10.6x
Established in 2009 in California, Tri Pointe Homes (NYSE: TPH) is a United States homebuilder recognized for its innovative and sustainable approach to creating premium, life-enhancing homes.
Why Is TPH Risky?
- Product roadmap and go-to-market strategy need to be reconsidered as its backlog has averaged 6.9% declines over the past two years
- Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
- Free cash flow margin shrank by 8.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Tri Pointe Homes’s stock price of $32.76 implies a valuation ratio of 10.6x forward P/E. To fully understand why you should be careful with TPH, check out our full research report (it’s free).
Pediatrix Medical Group (MD)
Forward P/E Ratio: 8.2x
With a network of approximately 2,620 affiliated physicians caring for some of the most vulnerable patients, Pediatrix Medical Group (NYSE: MD) provides specialized physician services focused on neonatal, maternal-fetal, pediatric cardiology and other pediatric subspecialty care across 37 states.
Why Do We Pass on MD?
- Weak comparable store sales trends over the past two years suggest there may be few opportunities in its core markets to open new facilities
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 1.8% annually while its revenue grew
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $12.81 per share, Pediatrix Medical Group trades at 8.2x forward P/E. Read our free research report to see why you should think twice about including MD in your portfolio.
Stocks We Like More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market 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 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% 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
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
