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 climbing an uphill battle and some other investments you should look into instead.

BigCommerce (BIGC)

Forward P/S Ratio: 1.1x

As a founding member of the MACH Alliance advocating for modern tech standards, BigCommerce (NASDAQ: BIGC) provides a SaaS platform that enables businesses to build and manage online stores, connect with marketplaces, and integrate with point-of-sale systems.

Why Do We Pass on BIGC?

1. Products, pricing, or go-to-market strategy may need some adjustments as its 3.9% average billings growth over the last year was weak
2. Estimated sales growth of 4% for the next 12 months implies demand will slow from its two-year trend
3. Poor expense management has led to operating margin losses

At $4.99 per share, BigCommerce trades at 1.1x forward price-to-sales. Dive into our free research report to see why there are better opportunities than BIGC.

Simply Good Foods (SMPL)

Forward P/E Ratio: 12.6x

Best known for its Atkins brand that was inspired by the popular diet of the same name, Simply Good Foods (NASDAQ: SMPL) is a packaged food company whose offerings help customers achieve their healthy eating or weight loss goals.

Why Are We Wary of SMPL?

1. Revenue base of $1.46 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
2. Estimated sales growth of 1.3% for the next 12 months implies demand will slow from its three-year trend
3. Capital intensity has ramped up over the last year as its free cash flow margin decreased by 5.5 percentage points

Simply Good Foods’s stock price of $24.18 implies a valuation ratio of 12.6x forward P/E. If you’re considering SMPL for your portfolio, see our FREE research report to learn more.

Choice Hotels (CHH)

Forward P/E Ratio: 14.1x

With almost 100% of its properties under franchise agreements, Choice Hotels (NYSE: CHH) is a hotel franchisor known for its diverse brand portfolio including Comfort Inn, Quality Inn, and Clarion.

Why Do We Think CHH Will Underperform?

1. Weak revenue per room over the past two years indicates challenges in maintaining pricing power and occupancy rates
2. Forecasted revenue decline of 1.6% for the upcoming 12 months implies demand will fall off a cliff
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Choice Hotels is trading at $101.43 per share, or 14.1x forward P/E. Read our free research report to see why you should think twice about including CHH in your portfolio.

High-Quality Stocks for All Market Conditions

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