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.
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. That said, here are three value stocks climbing an uphill battle and some other investments you should look into instead.
Shoe Carnival (SCVL)
Forward P/E Ratio: 6.9x
Known for its playful atmosphere that features carnival elements, Shoe Carnival (NASDAQ:SCVL) is a retailer that sells footwear from mainstream brands for the entire family.
Why Is SCVL Risky?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Smaller revenue base of $1.20 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Estimated sales decline of 1.4% for the next 12 months implies a challenging demand environment
Shoe Carnival’s stock price of $19.30 implies a valuation ratio of 6.9x forward price-to-earnings. To fully understand why you should be careful with SCVL, check out our full research report (it’s free).
Conagra (CAG)
Forward P/E Ratio: 11x
Founded in 1919 as Nebraska Consolidated Mills in Omaha, Nebraska, Conagra Brands today (NYSE:CAG) boasts a diverse portfolio of packaged foods brands that includes everything from whipped cream to jarred pickles to frozen meals.
Why Do We Avoid CAG?
- Declining unit sales over the past two years imply it may need to invest in product improvements to get back on track
- Demand will likely fall over the next 12 months as Wall Street expects flat revenue
- Efficiency has decreased over the last year as its operating margin fell by 7.9 percentage points
At $26.42 per share, Conagra trades at 11x forward price-to-earnings. Read our free research report to see why you should think twice about including CAG in your portfolio.
Coty (COTY)
Forward P/E Ratio: 8.7x
With a portfolio boasting many household brands, Coty (NYSE:COTY) is a beauty products powerhouse spanning cosmetics, fragrances, and skincare.
Why Does COTY Fall Short?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Projected sales are flat for the next 12 months, implying demand will slow from its three-year trend
- Underwhelming 1% return on capital reflects management’s difficulties in finding profitable growth opportunities
Coty is trading at $4.80 per share, or 8.7x forward price-to-earnings. If you’re considering COTY for your portfolio, see our FREE research report to learn more.
Stocks We Like More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio 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 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.