3 Value Stocks with Warning Signs

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. That said, here are three value stocks climbing an uphill battle and some other investments you should look into instead.

Newmark (NMRK)

Forward P/E Ratio: 12x

Founded in 1929, Newmark (NASDAQ:NMRK) provides commercial real estate services, including leasing advisory, global corporate services, investment sales and capital markets, property and facilities management, valuation and advisory, and consulting.

Why Should You Dump NMRK?

1. Annual revenue growth of 7.4% over the last five years was below our standards for the consumer discretionary sector
2. Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

At $18.35 per share, Newmark trades at 12x forward P/E. Read our free research report to see why you should think twice about including NMRK in your portfolio.

ICF International (ICFI)

Forward P/E Ratio: 13.7x

Operating at the intersection of policy, technology, and implementation for over five decades, ICF International (NASDAQ:ICFI) provides professional consulting services and technology solutions to government agencies and commercial clients across energy, health, environment, and security sectors.

Why Is ICFI Risky?

1. Demand cratered as it couldn’t win new orders over the past two years, leading to an average 1.2% decline in its backlog
2. Projected sales decline of 2.3% for the next 12 months points to a tough demand environment ahead
3. Underwhelming 8% return on capital reflects management’s difficulties in finding profitable growth opportunities

ICF International is trading at $92.80 per share, or 13.7x forward P/E. To fully understand why you should be careful with ICFI, check out our full research report (it’s free).

Ready Capital (RC)

Forward P/B Ratio: 0.4x

Operating as one of only 17 non-bank Small Business Lending Companies with preferred lender status from the SBA, Ready Capital (NYSE:RC) is a multi-strategy real estate finance company that originates, acquires, and services commercial real estate loans, small business loans, and other real estate investments.

Why Do We Avoid RC?

1. Annual net interest income growth of 4.9% over the last five years was below our standards for the banking sector
2. Earnings per share fell by 17.4% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
3. Loan losses and capital returns have eroded its tangible book value per share this cycle as its tangible book value per share declined by 6.9% annually over the last five years

Ready Capital’s stock price of $3.94 implies a valuation ratio of 0.4x forward P/B. If you’re considering RC for your portfolio, see our FREE research report to learn more.

High-Quality Stocks for All Market Conditions

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

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