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 three value stocks with little support and some other investments you should consider instead.

Bumble (BMBL)

Forward EV/EBITDA Ratio: 3.4x

Started by the co-founder of Tinder, Whitney Wolfe Herd, Bumble (NASDAQ: BMBL) is a leading dating app built with women at the center.

Why Is BMBL Not Exciting?

1. Competition may be pulling attention away from its platform as its 4.8% average growth in paying users was choppy
2. Concerning trends in both user engagement and monetization suggest its platform’s efficacy is declining as its average revenue per buyer fell by 3.9% annually
3. Forecasted revenue decline of 13.7% for the upcoming 12 months implies demand will fall off a cliff

Bumble is trading at $3.58 per share, or 3.4x forward EV/EBITDA. If you’re considering BMBL for your portfolio, see our FREE research report to learn more.

Best Buy (BBY)

Forward P/E Ratio: 10.2x

With humble beginnings as a stereo equipment seller, Best Buy (NYSE: BBY) now sells a broad selection of consumer electronics, appliances, and home office products.

Why Do We Avoid BBY?

1. Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
2. Gross margin of 22.5% is below its competitors, leaving less money for marketing and promotions
3. Responsiveness to unforeseen market trends is restricted due to its substandard operating margin profitability

Best Buy’s stock price of $66.66 implies a valuation ratio of 10.2x forward P/E. Check out our free in-depth research report to learn more about why BBY doesn’t pass our bar.

Bristol-Myers Squibb (BMY)

Forward P/E Ratio: 9.1x

With roots dating back to 1887 and a transformative merger in 1989 that gave the company its current name, Bristol-Myers Squibb (NYSE: BMY) discovers, develops, and markets prescription medications for serious diseases including cancer, blood disorders, immunological conditions, and cardiovascular diseases.

Why Do We Think Twice About BMY?

1. Sizable revenue base leads to growth challenges as its 3.9% annual revenue increases over the last two years fell short of other healthcare companies
2. Projected sales decline of 6.3% for the next 12 months points to a tough demand environment ahead
3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

At $56.99 per share, Bristol-Myers Squibb trades at 9.1x forward P/E. Dive into our free research report to see why there are better opportunities than BMY.

High-Quality Stocks for All Market Conditions

If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.

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