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.
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. Keeping that in mind, here are three value stocks with poor fundamentals and some alternatives you should consider instead.
La-Z-Boy (LZB)
Forward P/E Ratio: 13.3x
The prized possession of every mancave, La-Z-Boy (NYSE: LZB) is a furniture company specializing in recliners, sofas, and seats.
Why Should You Dump LZB?
- Sales trends were unexciting over the last five years as its 5.8% annual growth was below the typical consumer discretionary company
- Free cash flow margin is projected to show no improvement next year
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $37.91 per share, La-Z-Boy trades at 13.3x forward P/E. Check out our free in-depth research report to learn more about why LZB doesn’t pass our bar.
Omnicom Group (OMC)
Forward P/E Ratio: 8.5x
With a vast network of creative agencies that helped craft some of the most memorable ad campaigns in history, Omnicom Group (NYSE: OMC) is a strategic holding company that provides advertising, marketing, and communications services to many of the world's largest companies.
Why Do We Think Twice About OMC?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 7.6 percentage points
- Waning returns on capital imply its previous profit engines are losing steam
Omnicom Group’s stock price of $79.66 implies a valuation ratio of 8.5x forward P/E. If you’re considering OMC for your portfolio, see our FREE research report to learn more.
Farmer Mac (AGM)
Forward P/E Ratio: 9.6x
Created by Congress in 1987 to build a bridge between Wall Street and rural America, Farmer Mac (NYSE: AGM) provides a secondary market for agricultural and rural loans, helping lenders increase their liquidity and lending capacity to serve rural America.
Why Are We Wary of AGM?
- Annual revenue growth of 5.8% over the last two years was below our standards for the financials sector
- Earnings per share lagged its peers over the last two years as they only grew by 7.5% annually
- High debt-to-equity ratio of 19.6× shows the firm carries too much debt relative to shareholder equity, increasing bankruptcy risk
Farmer Mac is trading at $176.36 per share, or 9.6x forward P/E. Read our free research report to see why you should think twice about including AGM in your portfolio.
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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
