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. Keeping that in mind, here are three value stocks climbing an uphill battle and some other investments you should look into instead.
Penguin Solutions (PENG)
Forward P/E Ratio: 9x
Based in the US, Penguin Solutions (NASDAQ: PENG) is a diversified semiconductor company offering memory, digital, and LED products.
Why Is PENG Risky?
- Sales tumbled by 2.5% annually over the last two years, showing market trends are working against its favor during this cycle
- Gross margin of 29.1% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Low free cash flow margin of 6.2% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
Penguin Solutions’s stock price of $18.06 implies a valuation ratio of 9x forward P/E. To fully understand why you should be careful with PENG, check out our full research report (it’s free for active Edge members).
Calavo (CVGW)
Forward P/E Ratio: 11x
A trailblazer in the avocado industry, Calavo Growers (NASDAQ: CVGW) is a pioneering California-based provider of high-quality avocados and other fresh food products.
Why Do We Steer Clear of CVGW?
- Annual revenue declines of 17.2% over the last three years indicate problems with its market positioning
- Subscale operations are evident in its revenue base of $693.7 million, meaning it has fewer distribution channels than its larger rivals
- Gross margin of 10.1% is an output of its commoditized products
At $19.09 per share, Calavo trades at 11x forward P/E. Read our free research report to see why you should think twice about including CVGW in your portfolio.
Sirius XM (SIRI)
Forward P/E Ratio: 6.8x
Known for its commercial-free music channels, Sirius XM (NASDAQ: SIRI) is a broadcasting company that provides satellite radio and online radio services across North America.
Why Do We Pass on SIRI?
- Sluggish trends in its core subscribers suggest customers aren’t adopting its solutions as quickly as the company hoped
- Demand will likely be weak over the next 12 months as Wall Street expects flat revenue
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Sirius XM is trading at $20.79 per share, or 6.8x forward P/E. Dive into our free research report to see why there are better opportunities than SIRI.
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 9 Market-Beating Stocks. 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
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