1 Value Stock to Own for Decades and 2 We Avoid

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.

Identifying genuine bargains from value traps is something many investors struggle with, which is why we started StockStory - to help you find the best companies. That said, here is one value stock with strong fundamentals and two with little support.

Two Value Stocks to Sell:

American Eagle (AEO)

Forward P/E Ratio: 11x

With a heavy focus on denim, American Eagle Outfitters (NYSE:AEO) is a specialty retailer offering an assortment of apparel and accessories to young adults.

Why Does AEO Fall Short?

1. 3.9% annual revenue growth over the last six years was slower than its consumer retail peers
2. Responsiveness to unforeseen market trends is restricted due to its substandard operating margin profitability
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its falling returns suggest its earlier profit pools are drying up

At $15.24 per share, American Eagle trades at 11x forward P/E. Check out our free in-depth research report to learn more about why AEO doesn’t pass our bar.

ScanSource (SCSC)

Forward P/E Ratio: 10.5x

Operating as a crucial link in the technology supply chain since 1992, ScanSource (NASDAQ:SCSC) is a hybrid distributor that connects hardware, software, and cloud services from technology suppliers to resellers and business customers.

Why Should You Sell SCSC?

1. Sales tumbled by 11.4% annually over the last two years, showing market trends are working against its favor during this cycle
2. Earnings per share have dipped by 3.7% annually over the past two years, which is concerning because stock prices follow EPS over the long term
3. Underwhelming 8.1% return on capital reflects management’s difficulties in finding profitable growth opportunities

ScanSource’s stock price of $42.59 implies a valuation ratio of 10.5x forward P/E. Dive into our free research report to see why there are better opportunities than SCSC.

One Value Stock to Buy:

Enova (ENVA)

Forward P/E Ratio: 8.7x

Pioneering online lending since 2004 with a massive database of over 65 terabytes of customer behavior data, Enova International (NYSE:ENVA) provides online financial services including installment loans and lines of credit to non-prime consumers and small businesses in the United States and Brazil.

Why Is ENVA a Good Business?

1. Annual revenue growth of 23.4% over the past two years was outstanding, reflecting market share gains this cycle
2. Share repurchases over the last two years enabled its annual earnings per share growth of 26.8% to outpace its revenue gains
3. Annual book value per share growth of 25.4% over the last five years was superb and indicates its capital strength increased during this cycle

Enova is trading at $112.24 per share, or 8.7x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.

Stocks We Like Even More

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.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check 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).

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-micro-cap company Kadant (+351% 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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