3 Out-of-Favor Stocks We're Skeptical Of

Rock-bottom prices don't always mean rock-bottom businesses. The stocks we're examining today have all touched their 52-week lows, creating a classic investor's dilemma: bargain opportunity or value trap?

While market timing can be an extremely profitable strategy, it has burned many investors and requires rigorous analysis - something we specialize in at StockStory. That said, here are three stocks where the skepticism is well-placed and some better opportunities to consider.

Target (TGT)

One-Month Return: +6.8%

With a higher focus on style and aesthetics compared to other large general merchandise retailers, Target (NYSE:TGT) serves the suburban consumer who is looking for a wide range of products under one roof.

Why Do We Think Twice About TGT?

1. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
2. Commoditized inventory, bad unit economics, and high competition are reflected in its low gross margin of 28.1%
3. Earnings per share fell by 4.2% annually over the last six years while its revenue grew, showing its incremental sales were much less profitable

At $91.37 per share, Target trades at 11.8x forward P/E. Read our free research report to see why you should think twice about including TGT in your portfolio.

Marriott Vacations (VAC)

One-Month Return: -25%

Spun off from Marriott International in 1984, Marriott Vacations (NYSE:VAC) is a vacation company providing leisure experiences for travelers around the world.

Why Do We Steer Clear of VAC?

1. Sluggish trends in its conducted tours suggest customers aren’t adopting its solutions as quickly as the company hoped
2. Projected sales are flat for the next 12 months, implying demand will slow from its two-year trend
3. 7× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

Marriott Vacations is trading at $46.87 per share, or 6.4x forward P/E. Dive into our free research report to see why there are better opportunities than VAC.

Quanex (NX)

One-Month Return: -3.3%

Starting in the seamless tube industry, Quanex (NYSE:NX) manufactures building products like window, door, kitchen, and bath cabinet components.

Why Are We Wary of NX?

1. Earnings per share fell by 9.6% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 6.2 percentage points
3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

Quanex’s stock price of $13.06 implies a valuation ratio of 6.7x forward P/E. If you’re considering NX for your portfolio, see our FREE research report to learn more.

High-Quality Stocks for All Market Conditions

Fresh US-China trade tensions just tanked stocks—but strong bank earnings are fueling a sharp rebound. Don’t miss the bounce.

Don’t let fear keep you from great opportunities and take a look at 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 Tecnoglass (+1,754% 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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