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.
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 is one value stock trading at a big discount to its intrinsic value and two climbing an uphill battle.
Two Value Stocks to Sell:
Acadia Healthcare (ACHC)
Forward P/E Ratio: 8.9x
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 Wary of ACHC?
- Annual revenue growth of 2% over the last five years was below our standards for the healthcare sector
- Underwhelming admissions over the past two years suggest it might have to lower prices to accelerate growth
- Free cash flow margin dropped by 30 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Acadia Healthcare’s stock price of $24.12 implies a valuation ratio of 8.9x forward P/E. Dive into our free research report to see why there are better opportunities than ACHC.
Progyny (PGNY)
Forward P/E Ratio: 14.8x
Pioneering a data-driven approach to family building that has achieved an industry-leading patient satisfaction score of +80, Progyny (NASDAQ: PGNY) provides comprehensive fertility and family building benefits solutions to employers, helping employees access quality fertility treatments and support services.
Why Does PGNY Fall Short?
- Revenue base of $1.21 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Estimated sales growth of 3% for the next 12 months implies demand will slow from its two-year trend
- Negative returns on capital show management lost money while trying to expand the business
At $24.40 per share, Progyny trades at 14.8x forward P/E. Check out our free in-depth research report to learn more about why PGNY doesn’t pass our bar.
One Value Stock to Buy:
United Therapeutics (UTHR)
Forward P/E Ratio: 10x
Founded by a mother seeking treatment for her daughter's pulmonary arterial hypertension, United Therapeutics (NASDAQ: UTHR) develops and commercializes medications for chronic lung diseases and other life-threatening conditions, with a focus on pulmonary hypertension treatments.
Why Are We Backing UTHR?
- Impressive 22.9% annual revenue growth over the last two years indicates it’s winning market share this cycle
- UTHR is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
- Rising returns on capital show management is finding more attractive investment opportunities
United Therapeutics is trading at $285.80 per share, or 10x forward P/E. Is now the right time to buy? See for yourself in our in-depth 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 Growth Stocks for this month. 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-small-cap company Comfort Systems (+782% 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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