3 Out-of-Favor Stocks with Open Questions

The past year hasn't been kind to the stocks featured in this article. Each has tumbled to their lowest points in 12 months, leaving investors to decide whether they're witnessing fire sales or falling knives.

Price charts only tell part of the story. Our team at StockStory evaluates each company's underlying fundamentals to separate temporary setbacks from structural declines. That said, here are three stocks facing legitimate challenges and some alternatives worth exploring instead.

Universal Display (OLED)

One-Month Return: -23.9%

Serving major consumer electronics manufacturers, Universal Display (NASDAQ:OLED) is a provider of organic light emitting diode (OLED) technologies used in display and lighting applications.

Why Is OLED Not Exciting?

1. Estimated sales growth of 4.2% for the next 12 months implies demand will slow from its two-year trend
2. Free cash flow margin dropped by 3 percentage points over the last five years, implying the company became more capital intensive as competition picked up

At $98.60 per share, Universal Display trades at 20.1x forward P/E. If you’re considering OLED for your portfolio, see our FREE research report to learn more.

Papa John's (PZZA)

One-Month Return: -6.4%

Founded by the eclectic John “Papa John” Schnatter, Papa John’s (NASDAQ:PZZA) is a globally recognized pizza delivery and carryout chain known for “better ingredients” and “better pizza”.

Why Are We Out on PZZA?

1. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new restaurants
2. Projected sales decline of 6.1% for the next 12 months points to a tough demand environment ahead
3. Efficiency has decreased over the last year as its operating margin fell by 3.3 percentage points

Papa John's is trading at $32.59 per share, or 20.1x forward P/E. To fully understand why you should be careful with PZZA, check out our full research report (it’s free).

Medifast (MED)

One-Month Return: -4.4%

Known for its Optavia program that combines portion-controlled meal replacements with coaching, Medifast (NYSE:MED) has a broad product portfolio of bars, snacks, drinks, and desserts for those looking to lose weight or consume healthier foods.

Why Do We Pass on MED?

1. Annual revenue declines of 37.7% over the last three years indicate problems with its market positioning
2. Modest revenue base of $385.8 million gives it less fixed cost leverage and fewer distribution channels than larger companies
3. Earnings per share have dipped by 28.8% annually over the past three years, which is concerning because stock prices follow EPS over the long term

Medifast’s stock price of $10.65 implies a valuation ratio of 8.5x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why MED doesn’t pass our bar.

Stocks We Like More

WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.

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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.