2 Value Stocks to Research Further and 1 Facing Headwinds

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 two value stocks with strong fundamentals and one best left ignored.

One Value Stock to Sell:

Merchants Bancorp (MBIN)

Forward P/B Ratio: 1x

With a strategic focus on low-risk, government-backed lending programs, Merchants Bancorp (NASDAQCM:MBIN) is an Indiana-based bank holding company specializing in multi-family mortgage banking, mortgage warehousing, and traditional banking services.

Why Are We Cautious About MBIN?

1. Inferior net interest margin of 2.9% means it must compensate for lower profitability through increased loan originations
2. Performance over the past five years shows its incremental sales were less profitable as its earnings per share were flat
3. Tier one capital ratio of 9.2% raises concerns about the firm’s ability to maintain adequate liquidity

Merchants Bancorp’s stock price of $46.92 implies a valuation ratio of 1x forward P/B. Check out our free in-depth research report to learn more about why MBIN doesn’t pass our bar.

Two Value Stocks to Watch:

Lazard (LAZ)

Forward P/E Ratio: 15.5x

Tracing its roots back to 1848 when it began as a dry goods merchant in New Orleans, Lazard (NYSE:LAZ) is a global financial advisory and asset management firm that provides strategic advice to corporations, governments, institutions, and wealthy individuals.

Why Are We Positive On LAZ?

1. Stellar return on equity showcases management’s ability to surface highly profitable business ventures

Lazard is trading at $54.79 per share, or 15.5x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.

MediaAlpha (MAX)

Forward P/E Ratio: 7x

Powering nearly 10 million consumer referrals each month in the insurance marketplace, MediaAlpha (NYSE:MAX) operates a technology platform that connects insurance carriers with high-intent consumers shopping for property, casualty, health, and life insurance products.

Why Is MAX a Good Business?

1. Annual revenue growth of 68.6% over the past two years was outstanding, reflecting market share gains this cycle
2. Free cash flow margin grew by 5.1 percentage points over the last five years, giving the company more chips to play with
3. Improving returns on capital reflect management’s ability to monetize investments

At $7.85 per share, MediaAlpha trades at 7x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.

High-Quality Stocks for All Market Conditions

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