1 Value Stock with Exciting Potential and 2 We Find Risky

Value stocks typically trade at discounts to the broader market, offering patient investors the opportunity to buy businesses when they’re out of favor. The key risk, however, is that these stocks are usually cheap for a reason – five cents for a piece of fruit may seem like a great deal until you find out it’s rotten.

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 offering a compelling risk-reward profile and two with little support.

Two Value Stocks to Sell:

Middleby (MIDD)

Forward P/E Ratio: 14.4x

Holding a Guinness World Record for creating the world’s fastest conveyor pizza oven, Middleby (NYSE:MIDD) is a food service and equipment manufacturer.

Why Do We Think MIDD Will Underperform?

1. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
2. Estimated sales growth of 2% for the next 12 months is soft and implies weaker demand
3. Earnings per share lagged its peers over the last two years as they only grew by 1.2% annually

At $135.16 per share, Middleby trades at 14.4x forward P/E. Check out our free in-depth research report to learn more about why MIDD doesn’t pass our bar.

DXC (DXC)

Forward P/E Ratio: 4.6x

Born from the 2017 merger of Computer Sciences Corporation and HP Enterprise's services business, DXC Technology (NYSE:DXC) is a global IT services company that helps businesses transform their technology infrastructure, applications, and operations.

Why Should You Dump DXC?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Earnings per share have contracted by 3.6% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
3. Underwhelming 1.2% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its falling returns suggest its earlier profit pools are drying up

DXC’s stock price of $14.34 implies a valuation ratio of 4.6x forward P/E. If you’re considering DXC for your portfolio, see our FREE research report to learn more.

One Value Stock to Watch:

Urban Outfitters (URBN)

Forward P/E Ratio: 14x

Founded as a purveyor of vintage items, Urban Outfitters (NASDAQ:URBN) now largely sells new apparel and accessories to teens and young adults seeking on-trend fashion.

Why Could URBN Be a Winner?

1. Store expansion strategy is justified by its healthy same-store sales
2. Locations open for at least a year are seeing increased demand as same-store sales have averaged 4.3% growth over the past two years
3. Earnings growth has massively outpaced its peers over the last five years as its EPS has compounded at 64.3% annually

Urban Outfitters is trading at $70.95 per share, or 14x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out 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).

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