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.
This distinction between true value and value traps can challenge even the most skilled investors. Luckily for you, we started StockStory to help you uncover exceptional companies. Keeping that in mind, here is one value stock with strong fundamentals and two with little support.
Two Value Stocks to Sell:
Comcast (CMCSA)
Forward P/E Ratio: 8.2x
Formerly known as American Cable Systems, Comcast (NASDAQ:CMCSA) is a multinational telecommunications company offering a wide range of services.
Why Should You Dump CMCSA?
- Performance surrounding its domestic broadband customers has lagged its peers
- Estimated sales for the next 12 months are flat and imply a softer demand environment
- Underwhelming 8.8% return on capital reflects management’s difficulties in finding profitable growth opportunities
Comcast is trading at $36.15 per share, or 8.2x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than CMCSA.
eXp World (EXPI)
Forward P/E Ratio: 12.5x
Founded in 2009, eXp World (NASDAQ:EXPI) is a real estate company known for its virtual, cloud-based approach to real estate brokerage.
Why Are We Out on EXPI?
- Demand for its offerings was relatively low as its number of agents and brokers has underwhelmed
- Subpar operating margin of -0.2% constrains its ability to invest in process improvements or effectively respond to new competitive threats
- Negative returns on capital show that some of its growth strategies have backfired
eXp World’s stock price of $9.54 implies a valuation ratio of 12.5x forward price-to-earnings. Read our free research report to see why you should think twice about including EXPI in your portfolio.
One Value Stock to Watch:
Altria (MO)
Forward P/E Ratio: 10.7x
Best known for its Marlboro brand of cigarettes, Altria (NYSE:MO) offers tobacco and nicotine products.
Why Are We Positive On MO?
- Products command premium prices and result in a best-in-class gross margin of 69.9%
- Excellent operating margin of 55.7% highlights the efficiency of its business model
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
At $57.51 per share, Altria trades at 10.7x forward price-to-earnings. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market - and we’re zeroing in on the stocks that could benefit immensely.
Take advantage of the rebound by checking out our Top 5 Growth Stocks for this month. 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.