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.
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.
Five9 (FIVN)
Forward P/S Ratio: 1.9x
Started in 2001, Five9 (NASDAQ: FIVN) offers software-as-a-service that makes it easier for companies to set up and efficiently run call centers to offer more tailored customer support.
Why Do We Think Twice About FIVN?
- Revenue increased by 18% annually over the last three years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
- Estimated sales growth of 8.4% for the next 12 months implies demand will slow from its three-year trend
- Gross margin of 54.7% reflects its high servicing costs
Five9 is trading at $24.85 per share, or 1.9x forward price-to-sales. Read our free research report to see why you should think twice about including FIVN in your portfolio.
Pangaea (PANL)
Forward P/E Ratio: 4x
Established in 1996, Pangaea Logistics (NASDAQ: PANL) specializes in global logistics and transportation services, focusing on the shipment of dry bulk cargoes.
Why Do We Pass on PANL?
- Sales tumbled by 12.4% annually over the last two years, showing market trends are working against its favor during this cycle
- Performance over the past two years was negatively impacted by new share issuances as its earnings per share dropped by 40.2% annually, worse than its revenue
- Free cash flow margin shrank by 5.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Pangaea’s stock price of $4.20 implies a valuation ratio of 4x forward P/E. If you’re considering PANL for your portfolio, see our FREE research report to learn more.
Hub Group (HUBG)
Forward P/E Ratio: 14.2x
Started with $10,000, Hub Group (NASDAQ: HUBG) is a provider of intermodal, truck brokerage, and logistics services, facilitating transportation solutions for businesses worldwide.
Why Do We Steer Clear of HUBG?
- Declining unit sales over the past two years suggest it might have to lower prices to accelerate growth
- High input costs result in an inferior gross margin of 12.9% that must be offset through higher volumes
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
At $32.88 per share, Hub Group trades at 14.2x forward P/E. Check out our free in-depth research report to learn more about why HUBG doesn’t pass our bar.
Stocks We Like 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 6 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 Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.
