3 Value Stocks That Fall Short

August 29, 2025 at 00:39 AM EDT

WEN Cover Image

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.

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.

Wendy's (WEN)

Forward P/E Ratio: 10.7x

Founded by Dave Thomas in 1969, Wendy’s (NASDAQ: WEN) is a renowned fast-food chain known for its fresh, never-frozen beef burgers, flavorful menu options, and commitment to quality.

Why Does WEN Worry Us?

Disappointing same-store sales over the past two years show customers aren’t responding well to its menu offerings and dining experience
Projected sales decline of 1.9% for the next 12 months points to a tough demand environment ahead
7× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

Wendy’s stock price of $10.52 implies a valuation ratio of 10.7x forward P/E. To fully understand why you should be careful with WEN, check out our full research report (it’s free).

EPAM (EPAM)

Forward P/E Ratio: 15.2x

Founded in 1993 during the early days of offshore software development, EPAM Systems (NYSE: EPAM) provides digital engineering, cloud, and AI transformation services to help global enterprises and startups modernize their technology systems and create digital products.

Why Does EPAM Give Us Pause?

Constant currency revenue growth has disappointed over the past two years and shows demand was soft
Performance over the past two years shows its incremental sales were less profitable as its earnings per share were flat
Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

EPAM is trading at $174.18 per share, or 15.2x forward P/E. Read our free research report to see why you should think twice about including EPAM in your portfolio.

Capital Southwest (CSWC)

Forward P/E Ratio: 9.8x

Originally founded in 1961 as a venture capital investor that helped launch Texas Instruments, Capital Southwest (NASDAQ: CSWC) is a business development company that provides debt and equity financing to middle-market companies primarily in the United States.

Why Does CSWC Fall Short?

Earnings per share were flat over the last two years while its revenue grew, showing its incremental sales were less profitable

At $22.88 per share, Capital Southwest trades at 9.8x forward P/E. Check out our free in-depth research report to learn more about why CSWC doesn’t pass our bar.

High-Quality Stocks for All Market Conditions

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Don’t let fear keep you from great opportunities and take a look at Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

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3 Value Stocks That Fall Short

Wendy's (WEN)

EPAM (EPAM)

Capital Southwest (CSWC)

High-Quality Stocks for All Market Conditions

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