3 Value Stocks We Find Risky

The low valuation multiples for value stocks provide a margin of safety that growth stocks rarely offer. However, the challenge lies in determining whether these cheap assets are genuinely undervalued or simply on sale due to their potentially deteriorating business models.

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 are three value stocks with poor fundamentals and some alternatives you should consider instead.

Evolent Health (EVH)

Forward P/E Ratio: 12.2x

Founded in 2011 to transform how healthcare is delivered to patients with complex needs, Evolent Health (NYSE:EVH) provides specialty care management services and technology solutions that help health plans and providers deliver better care for patients with complex conditions.

Why Are We Cautious About EVH?

1. 7.1% annual revenue growth over the last two years was slower than its healthcare peers
2. Negative returns on capital show that some of its growth strategies have backfired, and its falling returns suggest its earlier profit pools are drying up
3. Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

Evolent Health’s stock price of $2.74 implies a valuation ratio of 12.2x forward P/E. To fully understand why you should be careful with EVH, check out our full research report (it’s free).

Bread Financial (BFH)

Forward P/E Ratio: 7.6x

Formerly known as Alliance Data Systems until its 2022 rebranding, Bread Financial (NYSE:BFH) provides credit cards, installment loans, and savings products to consumers while powering branded payment solutions for retailers and merchants.

Why Do We Think BFH Will Underperform?

1. Annual sales declines of 5.3% for the past two years show its products and services struggled to connect with the market during this cycle
2. Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable

At $76.00 per share, Bread Financial trades at 7.6x forward P/E. Dive into our free research report to see why there are better opportunities than BFH.

PennyMac Mortgage Investment Trust (PMT)

Forward P/B Ratio: 0.8x

Operating as a real estate investment trust since 2009 to maintain tax advantages, PennyMac Mortgage Investment Trust (NYSE:PMT) is a specialty finance company that invests in mortgage-related assets and operates a correspondent lending business.

Why Is PMT Risky?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 23.1% annually over the last five years
2. Sales were less profitable over the last two years as its earnings per share fell by 22% annually, worse than its revenue declines
3. Products and services are facing significant credit quality challenges during this cycle as tangible book value per share has declined by 5.4% annually over the last five years

PennyMac Mortgage Investment Trust is trading at $12.38 per share, or 0.8x forward P/B. Check out our free in-depth research report to learn more about why PMT doesn’t pass our bar.

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 9 Market-Beating Stocks. 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.