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.
Separating the winners from the value traps is a tough challenge, and that’s where StockStory comes in. Our job is to find you high-quality companies that will stand the test of time. Keeping that in mind, here is one value stock offering a compelling risk-reward profile and two best left ignored.
Two Value Stocks to Sell:
Compass (COMP)
Forward P/E Ratio: 13.9x
Fueled by its mission to replace the "paper-driven, antiquated workflow" of buying a house, Compass (NYSE: COMP) is a digital-first company operating a residential real estate brokerage in the United States.
Why Are We Hesitant About COMP?
- Number of principal agents has disappointed over the past two years, indicating weak demand for its offerings
- Historical operating margin losses point to an inefficient cost structure
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Compass is trading at $7.01 per share, or 13.9x forward P/E. Dive into our free research report to see why there are better opportunities than COMP.
Belden (BDC)
Forward P/E Ratio: 14.5x
With its enamel-coated copper wire used in WWI for the Allied forces, Belden (NYSE: BDC) designs, manufactures, and sells electronic components to various industries.
Why Does BDC Give Us Pause?
- Sales stagnated over the last two years and signal the need for new growth strategies
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 5%
- Earnings per share were flat over the last two years and fell short of the peer group average
At $109.78 per share, Belden trades at 14.5x forward P/E. If you’re considering BDC for your portfolio, see our FREE research report to learn more.
One Value Stock to Watch:
LegalZoom (LZ)
Forward EV/EBITDA Ratio: 9.5x
Founded by famous lawyer Robert Shapiro, LegalZoom (NASDAQ: LZ) offers online legal services and documentation assistance for individuals and businesses.
Why Do We Like LZ?
- Has the opportunity to boost monetization through new features and premium offerings as its subscription units have grown by 11.7% annually over the last two years
- Share buybacks catapulted its annual earnings per share growth to 177%, which outperformed its revenue gains over the last three years
- Free cash flow margin grew by 14.9 percentage points over the last few years, giving the company more chips to play with
LegalZoom’s stock price of $9.50 implies a valuation ratio of 9.5x forward EV/EBITDA. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free for active Edge members .
High-Quality Stocks for All Market Conditions
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. 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).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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
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