3 Value Stocks in Hot Water

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. That said, here are three value stocks with little support and some other investments you should consider instead.

Bumble (BMBL)

Forward EV/EBITDA Ratio: 2.6x

Started by the co-founder of Tinder, Whitney Wolfe Herd, Bumble (NASDAQ:BMBL) is a leading dating app built with women at the center.

Why Are We Wary of BMBL?

1. Preference for prioritizing user growth over monetization has led to 4.9% annual drops in its average revenue per buyer
2. Projected sales decline of 11.1% for the next 12 months points to a tough demand environment ahead
3. Capital intensity has ramped up over the last few years as its free cash flow margin decreased by 4.4 percentage points

Bumble is trading at $6.19 per share, or 2.6x forward EV/EBITDA. To fully understand why you should be careful with BMBL, check out our full research report (it’s free).

OneWater (ONEW)

Forward P/E Ratio: 7.9x

A public company since early 2020, OneWater Marine (NASDAQ:ONEW) sells boats, yachts, and other marine products.

Why Does ONEW Give Us Pause?

1. Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
2. Earnings per share have dipped by 54.5% annually over the past four years, which is concerning because stock prices follow EPS over the long term
3. High net-debt-to-EBITDA ratio of 7× increases the risk of forced asset sales or dilutive financing if operational performance weakens

OneWater’s stock price of $14.77 implies a valuation ratio of 7.9x forward P/E. Read our free research report to see why you should think twice about including ONEW in your portfolio.

Luxfer (LXFR)

Forward P/E Ratio: 10.9x

With its magnesium alloys used in the construction of the famous Spirit of St. Louis aircraft, Luxfer (NYSE:LXFR) offers specialized materials, components, and gas containment devices to various industries.

Why Do We Think LXFR Will Underperform?

1. Muted 1.6% annual revenue growth over the last one years shows its demand lagged behind its industrials peers
2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 8.7 percentage points
3. Eroding returns on capital suggest its historical profit centers are aging

At $11.40 per share, Luxfer trades at 10.9x forward P/E. Check out our free in-depth research report to learn more about why LXFR 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 183% over the last five years (as of March 31st 2025).

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.