3 Value Stocks Skating on Thin Ice

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.

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. Keeping that in mind, here are three value stocks with poor fundamentals and some alternatives you should consider instead.

Constellation Brands (STZ)

Forward P/E Ratio: 12.8x

With a presence in more than 100 countries, Constellation Brands (NYSE:STZ) is a globally renowned producer and marketer of beer, wine, and spirits.

Why Are We Hesitant About STZ?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Estimated sales decline of 6.8% for the next 12 months implies a challenging demand environment
3. Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 31.8 percentage points

Constellation Brands’s stock price of $164.80 implies a valuation ratio of 12.8x forward P/E. If you’re considering STZ for your portfolio, see our FREE research report to learn more.

Builders FirstSource (BLDR)

Forward P/E Ratio: 13.5x

Headquartered in Irving, TX, Builders FirstSource (NYSE:BLDR) is a construction materials manufacturer that offers a variety of lumber and lumber-related building products.

Why Do We Think Twice About BLDR?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 12.1% annually over the last two years
2. Earnings per share have contracted by 23.2% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
3. Diminishing returns on capital suggest its earlier profit pools are drying up

Builders FirstSource is trading at $130 per share, or 13.5x forward P/E. Check out our free in-depth research report to learn more about why BLDR doesn’t pass our bar.

ANI Pharmaceuticals (ANIP)

Forward P/E Ratio: 10.1x

With a diverse portfolio of 116 pharmaceutical products and a growing rare disease platform, ANI Pharmaceuticals (NASDAQ:ANIP) develops, manufactures, and markets branded and generic prescription pharmaceuticals, with a focus on rare disease treatments.

Why Does ANIP Worry Us?

1. Subscale operations are evident in its revenue base of $674.1 million, meaning it has fewer distribution channels than its larger rivals
2. Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 7 percentage points
3. Negative returns on capital show management lost money while trying to expand the business

At $65.06 per share, ANI Pharmaceuticals trades at 10.1x forward P/E. Read our free research report to see why you should think twice about including ANIP in your portfolio.

High-Quality Stocks for All Market Conditions

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 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 Comfort Systems (+782% 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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