3 Value Stocks That Concern Us

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.

Identifying genuine bargains from value traps is something many investors struggle with, which is why we started StockStory - to help you find the best companies. Keeping that in mind, here are three value stocks climbing an uphill battle and some other investments you should look into instead.

IAC (IAC)

Forward P/E Ratio: 16x

Originally known as InterActiveCorp and built through Barry Diller's strategic acquisitions since the 1990s, IAC (NASDAQ:IAC) operates a portfolio of category-leading digital businesses including Dotdash Meredith, Angi, and Care.com, focusing on digital publishing, home services, and caregiving platforms.

Why Are We Hesitant About IAC?

1. Annual sales declines of 14.1% for the past two years show its products and services struggled to connect with the market during this cycle
2. Earnings per share have dipped by 71.6% annually over the past five years, which is concerning because stock prices follow EPS over the long term
3. Push for growth has led to negative returns on capital, signaling value destruction

IAC is trading at $35.16 per share, or 16x forward price-to-earnings. Check out our free in-depth research report to learn more about why IAC doesn’t pass our bar.

Cable One (CABO)

Forward P/E Ratio: 6.2x

Founded in 1986, Cable One (NYSE:CABO) provides high-speed internet, cable television, and telephone services, primarily in smaller markets across the United States.

Why Should You Dump CABO?

1. Number of residential data subscribers has disappointed over the past two years, indicating weak demand for its offerings
2. Sales are projected to tank by 2.7% over the next 12 months as its demand continues evaporating
3. Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 4 percentage points

At $269.88 per share, Cable One trades at 6.2x forward price-to-earnings. Read our free research report to see why you should think twice about including CABO in your portfolio.

NVR (NVR)

Forward P/E Ratio: 14.6x

Known for its unique land acquisition strategy, NVR (NYSE:NVR) is a respected homebuilder and mortgage company in the United States.

Why Are We Wary of NVR?

1. Backlog growth averaged a weak 1.5% over the past two years, suggesting it may need to tweak its product roadmap or go-to-market strategy
2. Estimated sales decline of 8.2% for the next 12 months implies a challenging demand environment
3. Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 1.1% annually

NVR’s stock price of $7,071 implies a valuation ratio of 14.6x forward price-to-earnings. To fully understand why you should be careful with NVR, check out our full research report (it’s free).

Stocks We Like More

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.