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. That said, here are two value stocks trading at big discounts to their intrinsic values and one with little support.
One Value Stock to Sell:
Strategic Education (STRA)
Forward P/E Ratio: 12.9x
Formed through the merger of Strayer Education and Capella Education in 2018, Strategic Education (NASDAQ: STRA) is a career-focused higher education provider.
Why Should You Dump STRA?
- Number of domestic students has disappointed over the past two years, indicating weak demand for its offerings
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 7.1% annually
- ROIC of 3.7% reflects management’s challenges in identifying attractive investment opportunities
At $78.34 per share, Strategic Education trades at 12.9x forward P/E. Check out our free in-depth research report to learn more about why STRA doesn’t pass our bar.
Two Value Stocks to Watch:
Centene (CNC)
Forward P/E Ratio: 7.5x
Serving nearly 1 in 15 Americans through its government healthcare programs, Centene (NYSE: CNC) is a healthcare company that manages government-sponsored health insurance programs like Medicaid and Medicare for low-income and complex-needs populations.
Why Could CNC Be a Winner?
- Solid 14.2% annual revenue growth over the last five years indicates its offering’s solve complex business issues
- Dominant market position is represented by its $178.2 billion in revenue, which gives it negotiating power over membership pricing and reimbursement rates
- Historical investments are beginning to pay off as its returns on capital are growing
Centene’s stock price of $28.60 implies a valuation ratio of 7.5x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Merck (MRK)
Forward P/E Ratio: 9.2x
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 Should You Buy MRK?
- Massive revenue base of $63.62 billion in a highly regulated sector makes the company difficult to replace, giving it meaningful negotiating power
- Adjusted operating profits and efficiency rose over the last two years as it benefited from some fixed cost leverage
- Free cash flow margin expanded by 10.7 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
Merck is trading at $84.50 per share, or 9.2x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 9 Market-Beating Stocks. 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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