3 Value Stocks Walking a Fine Line

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.

Separating the winners from the value traps is a tough challenge, and that’s where StockStory comes in. Our job is to find you high-quality companies that will stand the test of time. That said, here are three value stocks with poor fundamentals and some alternatives you should consider instead.

Expedia (EXPE)

Forward EV/EBITDA Ratio: 10x

Originally founded as a part of Microsoft, Expedia (NASDAQ:EXPE) is one of the world’s leading online travel agencies.

Why Is EXPE Not Exciting?

1. Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 8.3% over the last three years was below our standards for the consumer internet sector
2. Customer spending has dipped by 1.7% on average as it focused on growing its bookings
3. Expensive marketing campaigns hurt its profitability and make us wonder what would happen if it let up on the gas

Expedia is trading at $272.13 per share, or 10x forward EV/EBITDA. Check out our free in-depth research report to learn more about why EXPE doesn’t pass our bar.

United Parcel Service (UPS)

Forward P/E Ratio: 14.6x

Trademarking its recognizable UPS Brown color, UPS (NYSE:UPS) offers package delivery, supply chain management, and freight forwarding services.

Why Do We Steer Clear of UPS?

1. Declining unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
2. Earnings per share were flat over the last five years while its revenue grew, showing its incremental sales were less profitable
3. Waning returns on capital imply its previous profit engines are losing steam

At $100.88 per share, United Parcel Service trades at 14.6x forward P/E. If you’re considering UPS for your portfolio, see our FREE research report to learn more.

First Merchants (FRME)

Forward P/B Ratio: 0.9x

Dating back to 1893 when it first opened its doors in Indiana, First Merchants (NASDAQ:FRME) is a Midwest regional bank providing commercial, consumer, and wealth management services through branches in Indiana, Ohio, Michigan, and Illinois.

Why Should You Sell FRME?

1. Flat sales over the last two years suggest it must find different ways to grow during this cycle
2. Annual net interest income growth of 7.1% over the last five years was below our standards for the banking sector
3. Earnings per share fell by 3.7% annually over the last two years while its revenue was flat, showing each sale was less profitable

First Merchants’s stock price of $38.81 implies a valuation ratio of 0.9x forward P/B. To fully understand why you should be careful with FRME, check out our full research report (it’s free for active Edge members).

Stocks We Like More

Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.

The names generating the next wave of massive growth are right here in 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 244% over the last five years (as of June 30, 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% 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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