Value investing has produced some of the world’s most famous investing billionaires, including Warren Buffett, David Einhorn, and Seth Klarman, who built their fortunes 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 are three value stocks with little support and some other investments you should consider instead.
Norwegian Cruise Line (NCLH)
Forward P/E Ratio: 9.1x
With amenities like a full go-kart race track built into its ships, Norwegian Cruise Line (NYSE: NCLH) is a premier global cruise company.
Why Do We Steer Clear of NCLH?
- Sluggish trends in its passenger cruise days suggest customers aren’t adopting its solutions as quickly as the company hoped
- Cash burn makes us question whether it can achieve sustainable long-term growth
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Norwegian Cruise Line’s stock price of $22.06 implies a valuation ratio of 9.1x forward P/E. Check out our free in-depth research report to learn more about why NCLH doesn’t pass our bar.
Enovis (ENOV)
Forward P/E Ratio: 7x
With a focus on helping patients regain or maintain their natural motion, Enovis (NYSE: ENOV) develops and manufactures medical devices for orthopedic care, from injury prevention and pain management to joint replacement and rehabilitation.
Why Is ENOV Risky?
- Annual sales declines of 6.5% for the past five years show its products and services struggled to connect with the market during this cycle
- Push for growth has led to negative returns on capital, signaling value destruction, and its shrinking returns suggest its past profit sources are losing steam
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Enovis is trading at $21.99 per share, or 7x forward P/E. To fully understand why you should be careful with ENOV, check out our full research report (it’s free).
BNY (BK)
Forward P/E Ratio: 14.6x
Tracing its roots back to 1784 when it was founded by Alexander Hamilton, BNY (NYSE: BK) is a global financial institution that provides asset servicing, wealth management, and investment services to institutions, corporations, and high-net-worth individuals.
Why Are We Wary of BK?
- Sizable revenue base leads to growth challenges as its 4.7% annual revenue increases over the last five years fell short of other financials companies
- Sizable asset base leads to capital growth challenges as its 6.3% annual tangible book value per share increases over the last five years fell short of other financials companies
- Underwhelming 9.3% return on equity reflects management’s difficulties in finding profitable growth opportunities
At $119.50 per share, BNY trades at 14.6x forward P/E. Dive into our free research report to see why there are better opportunities than BK.
High-Quality Stocks for All Market Conditions
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