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. That said, here is one value stock trading at a big discount to its intrinsic value and two best left ignored.
Two Value Stocks to Sell:
Calavo (CVGW)
Forward P/E Ratio: 13.8x
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 Does CVGW Fall Short?
- Products have few die-hard fans as sales have declined by 14.7% annually over the last three years
- Subscale operations are evident in its revenue base of $688.3 million, meaning it has fewer distribution channels than its larger rivals
- Gross margin of 10.6% is an output of its commoditized products
At $23.58 per share, Calavo trades at 13.8x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than CVGW.
DaVita (DVA)
Forward P/E Ratio: 13.3x
With over 2,600 dialysis centers across the United States and a presence in 13 countries, DaVita (NYSE: DVA) operates a network of dialysis centers providing treatment and care for patients with chronic kidney disease and end-stage kidney disease.
Why Does DVA Worry Us?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 2.4% for the last five years
- Flat treatments over the past two years indicate demand is soft and that the company may need to revise its strategy
- Anticipated sales growth of 5% for the next year implies demand will be shaky
DaVita is trading at $149 per share, or 13.3x forward price-to-earnings. Check out our free in-depth research report to learn more about why DVA doesn’t pass our bar.
One Value Stock to Watch:
Lyft (LYFT)
Forward EV/EBITDA Ratio: 9.2x
Founded by Logan Green and John Zimmer as a long-distance intercity carpooling company Zimride, Lyft (NASDAQ: LYFT) operates a ridesharing network in the US and Canada.
Why Could LYFT Be a Winner?
- Active Riders have increased by an average of 10% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features
- Performance over the past three years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 42.5% outpaced its revenue gains
- Free cash flow margin grew by 18.9 percentage points over the last few years, giving the company more chips to play with
Lyft’s stock price of $10.81 implies a valuation ratio of 9.2x forward EV-to-EBITDA. Is now a good time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum Stocks for this week. 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 United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.
