Value stocks typically trade at discounts to the broader market, offering patient investors the opportunity to buy businesses when they’re out of favor. The key risk, however, is that these stocks are usually cheap for a reason – five cents for a piece of fruit may seem like a great deal until you find out it’s rotten.
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.
Bandwidth (BAND)
Forward P/S Ratio: 0.6x
Started in 1999 by David Morken who was later joined by Henry Kaestner as co-founder in 2001, Bandwidth (NASDAQ: BAND) provides thousands of customers with a software platform that uses its own global network to provide phone numbers, voice, and text connectivity.
Why Should You Dump BAND?
- Revenue increased by 13.9% annually over the last three years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
- Estimated sales growth of 2.8% for the next 12 months implies demand will slow from its three-year trend
- Gross margin of 38% is way below its competitors, leaving less money to invest in areas like marketing and R&D
Bandwidth is trading at $15.16 per share, or 0.6x forward price-to-sales. Check out our free in-depth research report to learn more about why BAND doesn’t pass our bar.
Gap (GAP)
Forward P/E Ratio: 8.6x
Operating under the Gap, Old Navy, Banana Republic, and Athleta brands, Gap (NYSE: GAP) is an apparel and accessories retailer selling casual clothing to men, women, and children.
Why Are We Cautious About GAP?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Estimated sales growth of 1.3% for the next 12 months is soft and implies weaker demand
- Underwhelming 7.1% return on capital reflects management’s difficulties in finding profitable growth opportunities
Gap’s stock price of $20.38 implies a valuation ratio of 8.6x forward P/E. Dive into our free research report to see why there are better opportunities than GAP.
AdaptHealth (AHCO)
Forward P/E Ratio: 8.5x
With a network of approximately 680 locations serving patients across all 50 states, AdaptHealth (NASDAQ: AHCO) provides home medical equipment, supplies, and related services to patients with chronic conditions like sleep apnea, diabetes, and respiratory disorders.
Why Does AHCO Give Us Pause?
- Muted 3.9% annual revenue growth over the last two years shows its demand lagged behind its healthcare peers
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its decreasing returns suggest its historical profit centers are aging
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $9.32 per share, AdaptHealth trades at 8.5x forward P/E. Read our free research report to see why you should think twice about including AHCO in your portfolio.
High-Quality Stocks for All Market Conditions
When Trump unveiled his aggressive tariff plan in April 2024, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at 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 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
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