3 Value Stocks in Hot Water

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 three value stocks with little support and some other investments you should consider instead.

Teladoc (TDOC)

Forward EV/EBITDA Ratio: 4.3x

Founded to help people in rural areas get online medical consultations, Teladoc Health (NYSE:TDOC) is a telemedicine platform that facilitates remote doctor’s visits.

Why Are We Hesitant About TDOC?

1. Sales trends were unexciting over the last three years as its 6% annual growth was below the typical consumer internet company
2. Focus on expanding its platform came at the expense of monetization as its average revenue per user fell by 5.3% annually
3. Forecasted revenue decline of 1.3% for the upcoming 12 months implies demand will fall off a cliff

At $7.35 per share, Teladoc trades at 4.3x forward EV/EBITDA. To fully understand why you should be careful with TDOC, check out our full research report (it’s free).

Sally Beauty (SBH)

Forward P/E Ratio: 4.7x

Catering to both everyday consumers as well as salon professionals, Sally Beauty (NYSE:SBH) is a retailer that sells salon-quality beauty products such as makeup and haircare products.

Why Do We Avoid SBH?

1. Store closures and poor same-store sales reveal weak demand and a push toward operational efficiency
2. Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
3. Modest revenue base of $3.70 billion gives it less fixed cost leverage and fewer distribution channels than larger companies

Sally Beauty’s stock price of $8.90 implies a valuation ratio of 4.7x forward P/E. Read our free research report to see why you should think twice about including SBH in your portfolio.

Guess (GES)

Forward P/E Ratio: 5.8x

Flexing the iconic upside-down triangle logo with a question mark, Guess (NYSE:GES) is a global fashion brand known for its trendy clothing, accessories, and denim wear.

Why Do We Steer Clear of GES?

1. Annual revenue growth of 2.3% over the last five years was below our standards for the consumer discretionary sector
2. Estimated sales growth of 3.6% for the next 12 months implies demand will slow from its two-year trend
3. High net-debt-to-EBITDA ratio of 5× could force the company to raise capital at unfavorable terms if market conditions deteriorate

Guess is trading at $11.63 per share, or 5.8x forward P/E. Check out our free in-depth research report to learn more about why GES doesn’t pass our bar.

Stocks We Like More

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out 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 176% over the last five years.

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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.