1 Value Stock with Exciting Potential and 2 Facing Headwinds

Value investing has created more billionaires than any other strategy, like Warren Buffett, who built his fortune by purchasing wonderful businesses at reasonable prices. But these hidden gems are few and far between - many stocks that appear cheap often stay that way because they face structural issues.

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 is one value stock trading at a big discount to its intrinsic value and two with little support.

Two Value Stocks to Sell:

Toll Brothers (TOL)

Forward P/E Ratio: 10.9x

Started by two brothers who started by building and selling just one home in Pennsylvania, today Toll Brothers (NYSE:TOL) is a luxury homebuilder across the United States.

Why Do We Think Twice About TOL?

1. Product roadmap and go-to-market strategy need to be reconsidered as its backlog has averaged 8.5% declines over the past two years
2. Sales are projected to tank by 4.7% over the next 12 months as demand evaporates
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 3.6 percentage points

Toll Brothers’s stock price of $138.45 implies a valuation ratio of 10.9x forward P/E. To fully understand why you should be careful with TOL, check out our full research report (it’s free for active Edge members).

First Advantage (FA)

Forward P/E Ratio: 13.5x

Processing approximately 100 million background checks annually across more than 200 countries and territories, First Advantage (NASDAQ:FA) provides employment background screening, identity verification, and compliance solutions to help companies manage hiring risks.

Why Does FA Worry Us?

1. Incremental sales over the last two years were much less profitable as its earnings per share fell by 4.6% annually while its revenue grew
2. Free cash flow margin shrank by 15.1 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
3. Low returns on capital reflect management’s struggle to allocate funds effectively, and its falling returns suggest its earlier profit pools are drying up

First Advantage is trading at $15.29 per share, or 13.5x forward P/E. Dive into our free research report to see why there are better opportunities than FA.

One Value Stock to Buy:

Synchrony Financial (SYF)

Forward P/E Ratio: 9.4x

Powering over 73 million active accounts and partnerships with major brands like Amazon, PayPal, and Lowe's, Synchrony Financial (NYSE:SYF) provides credit cards, installment loans, and banking products through partnerships with retailers, healthcare providers, and digital platforms.

Why Are We Bullish on SYF?

1. Share repurchases have amplified shareholder returns as its annual earnings per share growth of 30.1% exceeded its revenue gains over the last two years
2. Annual tangible book value per share growth of 20.8% over the last two years was superb and indicates its capital strength increased during this cycle
3. Stellar return on equity showcases management’s ability to surface highly profitable business ventures

At $85.41 per share, Synchrony Financial trades at 9.4x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free for active Edge members.

Stocks We Like Even 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 5 Growth Stocks for this month. 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-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.