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. That said, here are three value stocks with little support and some other investments you should consider instead.
Pangaea (PANL)
Forward P/E Ratio: 8.2x
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 Think Twice About PANL?
- Gross margin of 19.1% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Falling earnings per share over the last four years has some investors worried as stock prices ultimately follow EPS over the long term
- Poor free cash flow margin of 0.6% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
Pangaea’s stock price of $8.92 implies a valuation ratio of 8.2x forward P/E. Read our free research report to see why you should think twice about including PANL in your portfolio.
Biogen (BIIB)
Forward P/E Ratio: 12.5x
Founded in 1978 and pioneering treatments for some of medicine's most complex challenges, Biogen (NASDAQ: BIIB) develops and markets therapies for neurological conditions, including multiple sclerosis, Alzheimer's disease, spinal muscular atrophy, and rare diseases.
Why Do We Avoid BIIB?
- Annual sales declines of 5.4% for the past five years show its products and services struggled to connect with the market during this cycle
- Forecasted revenue decline of 5.2% for the upcoming 12 months implies demand will fall off a cliff
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 14.2% annually, worse than its revenue
Biogen is trading at $193.93 per share, or 12.5x forward P/E. Dive into our free research report to see why there are better opportunities than BIIB.
WEX (WEX)
Forward P/E Ratio: 8.8x
Originally founded in 1983 as Wright Express to serve the fleet card market, WEX (NYSE: WEX) provides payment processing and business solutions across fleet management, employee benefits, and corporate payments sectors.
Why Are We Hesitant About WEX?
- 2.2% annual revenue growth over the last two years was slower than its financials peers
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 4.5% annually
At $158.98 per share, WEX trades at 8.8x forward P/E. To fully understand why you should be careful with WEX, check out our full research report (it’s free).
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