Value investing has created more billionaires than any other strategy, like Warren Buffett, who built his fortune by purchasing wonderful businesses at reasonable prices. But these hidden gems are few and far between - many stocks that appear cheap often stay that way because they face structural issues.
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 poor fundamentals and some alternatives you should consider instead.
ZoomInfo (GTM)
Forward P/S Ratio: 2.4x
Operating a platform it calls "RevOS" - short for Revenue Operating System - ZoomInfo (NASDAQ: GTM) provides sales, marketing, and recruiting teams with business intelligence and analytics to identify prospects and deliver targeted outreach.
Why Do We Think GTM Will Underperform?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 1% underwhelmed
- Estimated sales for the next 12 months are flat and imply a softer demand environment
- Operating margin improved by 5.1 percentage points over the last year as it eliminated redundant costs
ZoomInfo’s stock price of $10.25 implies a valuation ratio of 2.4x forward price-to-sales. To fully understand why you should be careful with GTM, check out our full research report (it’s free for active Edge members).
Crocs (CROX)
Forward P/E Ratio: 7.5x
Founded in 2002, Crocs (NASDAQ: CROX) sells casual footwear and is known for its iconic clog shoe.
Why Do We Pass on CROX?
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Free cash flow margin is anticipated to expand by 1.9 percentage points over the next year, providing additional flexibility for investments and share buybacks/dividends
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Crocs is trading at $85.67 per share, or 7.5x forward P/E. Dive into our free research report to see why there are better opportunities than CROX.
Hercules Capital (HTGC)
Forward P/E Ratio: 9.4x
Named after the mythological hero known for his strength, Hercules Capital (NYSE: HTGC) is a business development company that provides debt financing to venture capital-backed and growth-stage technology and life sciences companies.
Why Are We Wary of HTGC?
- Incremental sales over the last two years were much less profitable as its earnings per share fell by 1.8% annually while its revenue grew
At $18.87 per share, Hercules Capital trades at 9.4x forward P/E. If you’re considering HTGC for your portfolio, see our FREE research report to learn more.
Stocks We Like More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our 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 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% 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.
