3 Value Stocks 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. Keeping that in mind, here are three value stocks with poor fundamentals and some alternatives you should consider instead.

Academy Sports (ASO)

Forward P/E Ratio: 6.5x

Founded in 1938 as a tire shop before expanding into fishing equipment, Academy Sports & Outdoor (NASDAQ:ASO) sells a broad selection of sporting goods but is still known for its outdoor activity merchandise.

Why Does ASO Fall Short?

1. Lackluster 4.2% annual revenue growth over the last five years indicates the company is losing ground to competitors
2. Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
3. Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 1.9 percentage points

At $42.95 per share, Academy Sports trades at 6.5x forward P/E. Dive into our free research report to see why there are better opportunities than ASO.

Arrow Electronics (ARW)

Forward P/E Ratio: 10.1x

Founded as a single retail store, Arrow Electronics (NYSE:ARW) provides electronic components and enterprise computing solutions to businesses globally.

Why Are We Out on ARW?

1. Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last five years
2. Earnings per share have contracted by 32.1% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
3. Waning returns on capital imply its previous profit engines are losing steam

Arrow Electronics’s stock price of $118.69 implies a valuation ratio of 10.1x forward P/E. To fully understand why you should be careful with ARW, check out our full research report (it’s free).

AbbVie (ABBV)

Forward P/E Ratio: 14.3x

Born from a 2013 spinoff of Abbott Laboratories' pharmaceutical business, AbbVie (NYSE:ABBV) is a biopharmaceutical company that develops and markets medications for autoimmune diseases, cancer, neurological disorders, and other complex health conditions.

Why Do We Think Twice About ABBV?

1. Constant currency revenue growth has disappointed over the past two years and shows demand was soft
2. Efficiency has decreased over the last two years as its adjusted operating margin fell by 9.2 percentage points
3. Free cash flow margin dropped by 8.6 percentage points over the last five years, implying the company became more capital intensive as competition picked up

AbbVie is trading at $181.21 per share, or 14.3x forward P/E. If you’re considering ABBV for your portfolio, see our FREE research report to learn more.

High-Quality Stocks for All Market Conditions

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio 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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.