The low valuation multiples for value stocks provide a margin of safety that growth stocks rarely offer. However, the challenge lies in determining whether these cheap assets are genuinely undervalued or simply on sale due to their potentially deteriorating business models.
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 climbing an uphill battle and some other investments you should look into instead.
Tapestry (TPR)
Forward P/E Ratio: 14.5x
Originally founded as Coach, Tapestry (NYSE:TPR) is an American fashion conglomerate with a portfolio of luxury brands offering high-quality accessories and fashion products.
Why Are We Hesitant About TPR?
- Lackluster 1.4% annual revenue growth over the last two years indicates the company is losing ground to competitors
- Constant currency revenue growth has disappointed over the past two years and shows demand was soft
- Estimated sales growth of 3% for the next 12 months is soft and implies weaker demand
At $73.30 per share, Tapestry trades at 14.5x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than TPR.
Nexstar Media (NXST)
Forward P/E Ratio: 12.4x
Founded in 1996, Nexstar (NASDAQ:NXST) is an American media company operating numerous local television stations and digital media outlets across the country.
Why Is NXST Not Exciting?
- 1.9% annual revenue growth over the last two years was slower than its consumer discretionary peers
- Sales are projected to tank by 8% over the next 12 months as demand evaporates
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 6.2 percentage points
Nexstar Media is trading at $170.11 per share, or 12.4x forward price-to-earnings. Check out our free in-depth research report to learn more about why NXST doesn’t pass our bar.
Brunswick (BC)
Forward P/E Ratio: 11.4x
Formerly known as Brunswick-Balke-Collender Company, Brunswick (NYSE: BC) is a designer and manufacturer of recreational marine products, including boats, engines, and marine parts.
Why Do We Steer Clear of BC?
- Annual sales declines of 12.3% for the past two years show its products and services struggled to connect with the market
- Anticipated sales growth of 1.3% for the next year implies demand will be shaky
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Brunswick’s stock price of $58.10 implies a valuation ratio of 11.4x forward price-to-earnings. If you’re considering BC for your portfolio, see our FREE research report to learn more.
Stocks We Like More
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