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.
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. That said, here is one value stock with strong fundamentals and two climbing an uphill battle.
Two Value Stocks to Sell:
Regal Rexnord (RRX)
Forward P/E Ratio: 13.3x
Headquartered in Milwaukee, Regal Rexnord (NYSE: RRX) provides power transmission and industrial automation products.
Why Do We Think Twice About RRX?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Earnings per share have dipped by 3.1% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Low returns on capital reflect management’s struggle to allocate funds effectively, and its decreasing returns suggest its historical profit centers are aging
Regal Rexnord’s stock price of $143 implies a valuation ratio of 13.3x forward P/E. Check out our free in-depth research report to learn more about why RRX doesn’t pass our bar.
Compass Diversified (CODI)
Forward P/E Ratio: 2.8x
Operating with a permanent capital structure unlike traditional private equity funds, Compass Diversified (NYSE: CODI) is a private equity firm that acquires, manages, and grows middle-market businesses across various industries.
Why Does CODI Fall Short?
- Annual revenue growth of 1.6% over the last two years was below our standards for the financials sector
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 9.2% annually
- Below-average return on equity indicates management struggled to find compelling investment opportunities
Compass Diversified is trading at $6.72 per share, or 2.8x forward P/E. Read our free research report to see why you should think twice about including CODI in your portfolio.
One Value Stock to Watch:
First Financial Bancorp (FFBC)
Forward P/B Ratio: 0.9x
Tracing its roots back to 1863 during the Civil War era, First Financial Bancorp (NASDAQ: FFBC) is a bank holding company that provides commercial banking, lending, deposit services, and wealth management to individuals and businesses.
Why Could FFBC Be a Winner?
- Share buybacks propelled its annual earnings per share growth to 8%, which outperformed its revenue gains over the last five years
- Annual tangible book value per share growth of 17% over the last two years was superb and indicates its capital strength increased during this cycle
- Market-beating return on equity illustrates that management has a knack for investing in profitable ventures
At $25.82 per share, First Financial Bancorp trades at 0.9x forward P/B. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
When Trump unveiled his aggressive tariff plan in April 2025, 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 Kadant (+351% 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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