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 poor fundamentals and some alternatives you should consider instead.
Kirby (KEX)
Forward P/E Ratio: 14.1x
Transporting goods along all U.S. coasts, Kirby (NYSE: KEX) provides inland and coastal marine transportation services.
Why Do We Think Twice About KEX?
- Muted 4.4% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
- Free cash flow margin shrank by 7 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Low returns on capital reflect management’s struggle to allocate funds effectively
Kirby is trading at $98.25 per share, or 14.1x forward P/E. Dive into our free research report to see why there are better opportunities than KEX.
Avnet (AVT)
Forward P/E Ratio: 10.5x
With a century-long history of adapting to technological evolution, Avnet (NASDAQ: AVT) is a global electronic components distributor that connects manufacturers of semiconductors and other electronic parts with businesses that need these components.
Why Does AVT Give Us Pause?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 8.5% annually over the last two years
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of -0.1% for the last five years
Avnet’s stock price of $54.79 implies a valuation ratio of 10.5x forward P/E. To fully understand why you should be careful with AVT, check out our full research report (it’s free).
Bread Financial (BFH)
Forward P/E Ratio: 8.3x
Formerly known as Alliance Data Systems until its 2022 rebranding, Bread Financial (NYSE: BFH) provides credit cards, installment loans, and savings products to consumers while powering branded payment solutions for retailers and merchants.
Why Should You Dump BFH?
- Annual sales declines of 5.4% for the past two years show its products and services struggled to connect with the market during this cycle
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 6.8% annually
At $63.42 per share, Bread Financial trades at 8.3x forward P/E. If you’re considering BFH for your portfolio, see our FREE research report to learn more.
High-Quality Stocks for All Market Conditions
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Don’t let fear keep you from great opportunities and take a look at Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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