3 Value Stocks That Concern Us

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 with little support and some other investments you should consider instead.

Atkore (ATKR)

Forward P/E Ratio: 7.4x

Protecting the things that power our world, Atkore (NYSE:ATKR) designs and manufactures electrical safety products.

Why Are We Hesitant About ATKR?

1. 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
2. Sales were less profitable over the last two years as its earnings per share fell by 25.6% annually, worse than its revenue declines
3. Eroding returns on capital suggest its historical profit centers are aging

Atkore is trading at $63.93 per share, or 7.4x forward price-to-earnings. To fully understand why you should be careful with ATKR, check out our full research report (it’s free).

Tri Pointe Homes (TPH)

Forward P/E Ratio: 9.8x

Established in 2009 in California, Tri Pointe Homes (NYSE:TPH) is a United States homebuilder recognized for its innovative and sustainable approach to creating premium, life-enhancing homes.

Why Do We Think TPH Will Underperform?

1. Backlog has dropped by 6.9% on average over the past two years, suggesting it’s losing orders as competition picks up
2. Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
3. Free cash flow margin dropped by 8.8 percentage points over the last five years, implying the company became more capital intensive as competition picked up

Tri Pointe Homes’s stock price of $30.65 implies a valuation ratio of 9.8x forward price-to-earnings. Check out our free in-depth research report to learn more about why TPH doesn’t pass our bar.

Genpact (G)

Forward P/E Ratio: 14x

Originally spun off from General Electric in 2005 to provide business process services, Genpact (NYSE:G) is a global professional services firm that helps businesses transform their operations through digital technology, AI, and data analytics solutions.

Why Is G Not Exciting?

1. Muted 4.4% annual revenue growth over the last two years shows its demand lagged behind its business services peers
2. Constant currency revenue growth has disappointed over the past two years and shows demand was soft
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 2.5 percentage points

At $47.95 per share, Genpact trades at 14x forward price-to-earnings. Read our free research report to see why you should think twice about including G in your portfolio.

Stocks We Like More

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

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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 Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.