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.

This distinction between true value and value traps can challenge even the most skilled investors. Luckily for you, we started StockStory to help you uncover exceptional companies. That said, here are three value stocks climbing an uphill battle and some other investments you should look into instead.

J. M. Smucker (SJM)

Forward P/E Ratio: 10.1x

Best known for its fruit jams and spreads, J.M Smucker (NYSE: SJM) is a packaged foods company whose products span from peanut butter and coffee to pet food.

Why Should You Sell SJM?

1. 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
2. Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 22.2 percentage points
3. ROIC of 2.1% reflects management’s challenges in identifying attractive investment opportunities, and its shrinking returns suggest its past profit sources are losing steam

J. M. Smucker is trading at $97.83 per share, or 10.1x forward P/E. Check out our free in-depth research report to learn more about why SJM doesn’t pass our bar.

Resideo (REZI)

Forward P/E Ratio: 12.8x

Resideo Technologies, Inc. (NYSE: REZI) is a manufacturer and distributor of technology-driven products and solutions for home comfort, energy management, water management, and safety and security.

Why Does REZI Give Us Pause?

1. Estimated sales growth of 2.9% for the next 12 months implies demand will slow from its two-year trend
2. 22.8 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
3. Eroding returns on capital suggest its historical profit centers are aging

At $35.12 per share, Resideo trades at 12.8x forward P/E. Dive into our free research report to see why there are better opportunities than REZI.

Hewlett Packard Enterprise (HPE)

Forward P/E Ratio: 10.2x

Born from the 2015 split of the iconic Silicon Valley pioneer Hewlett-Packard, Hewlett Packard Enterprise (NYSE: HPE) provides edge-to-cloud technology solutions that help businesses capture, analyze, and act upon their data across hybrid IT environments.

Why Is HPE Not Exciting?

1. Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 4.9% over the last five years was below our standards for the business services sector
2. Incremental sales over the last two years were much less profitable as its earnings per share fell by 5.5% annually while its revenue grew
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 10.5 percentage points

Hewlett Packard Enterprise’s stock price of $23.86 implies a valuation ratio of 10.2x forward P/E. Read our free research report to see why you should think twice about including HPE in your portfolio.

High-Quality Stocks for All Market Conditions

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