3 Out-of-Favor Stocks with Warning Signs

Hitting a new 52-week low can be a pivotal moment for any stock. These floors often mark either the beginning of a turnaround story or confirmation that a company faces serious headwinds.

Price charts only tell part of the story. Our team at StockStory evaluates each company's underlying fundamentals to separate temporary setbacks from structural declines. Keeping that in mind, here are three stocks where the outlook is warranted and some alternatives with better fundamentals.

J&J Snack Foods (JJSF)

One-Month Return: -1.8%

Best known for its SuperPretzel soft pretzels and ICEE frozen drinks, J&J Snack Foods (NASDAQ:JJSF) produces a range of snacks and beverages and distributes them primarily to supermarket and food service customers.

Why Do We Think Twice About JJSF?

1. Revenue base of $1.6 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
2. Demand will likely fall over the next 12 months as Wall Street expects flat revenue
3. Free cash flow margin dropped by 2.7 percentage points over the last year, implying the company became more capital intensive as competition picked up

J&J Snack Foods is trading at $95.96 per share, or 36.1x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including JJSF in your portfolio.

EPAM (EPAM)

One-Month Return: +1.1%

Founded in 1993 during the early days of offshore software development, EPAM Systems (NYSE:EPAM) provides digital engineering, cloud, and AI transformation services to help global enterprises and startups modernize their technology systems and create digital products.

Why Are We Cautious About EPAM?

1. Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
2. Performance over the past two years shows its incremental sales were less profitable as its earnings per share were flat
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

EPAM’s stock price of $155.80 implies a valuation ratio of 13.5x forward P/E. Check out our free in-depth research report to learn more about why EPAM doesn’t pass our bar.

Gartner (IT)

One-Month Return: -2.7%

With over 2,500 research experts guiding organizations through complex technology landscapes, Gartner (NYSE:IT) provides research, advisory services, and conferences that help executives make better decisions about technology and other business priorities.

Why Is IT Not Exciting?

1. Estimated sales growth of 2.9% for the next 12 months implies demand will slow from its two-year trend
2. 3.3 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position

At $251.05 per share, Gartner trades at 20.3x forward P/E. If you’re considering IT for your portfolio, see our FREE research report to learn more.

Stocks We Like 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 5 Growth Stocks for this month. 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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