3 Value Stocks with Mounting Challenges

Value investing has created more billionaires than any other strategy, like Warren Buffett, who built his fortune by purchasing wonderful businesses at reasonable prices. But these hidden gems are few and far between - many stocks that appear cheap often stay that way because they face structural issues.

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

Chegg (CHGG)

Forward EV/EBITDA Ratio: 1.7x

Started as a physical textbook rental service, Chegg (NYSE:CHGG) is now a digital platform addressing student pain points by providing study and academic assistance.

Why Should You Sell CHGG?

1. Value proposition isn’t resonating strongly as its services subscribers averaged 13.4% drops over the last two years
2. Inability to adjust its cost structure while its revenue declined over the last few years led to a 13.1 percentage point drop in the company’s EBITDA margin
3. Sales were less profitable over the last three years as its earnings per share fell by 30.8% annually, worse than its revenue declines

Chegg is trading at $1.04 per share, or 1.7x forward EV/EBITDA. Check out our free in-depth research report to learn more about why CHGG doesn’t pass our bar.

IQVIA (IQV)

Forward P/E Ratio: 11.5x

Created from the 2016 merger of Quintiles (a clinical research organization) and IMS Health (a healthcare data specialist), IQVIA (NYSE:IQV) provides clinical research services, data analytics, and technology solutions to help pharmaceutical companies develop and market medications more effectively.

Why Are We Wary of IQV?

1. Sizable revenue base leads to growth challenges as its 3.4% annual revenue increases over the last two years fell short of other healthcare companies
2. Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
3. 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

IQVIA’s stock price of $140.33 implies a valuation ratio of 11.5x forward P/E. To fully understand why you should be careful with IQV, check out our full research report (it’s free).

CSG (CSGS)

Forward P/E Ratio: 13.8x

Powering billions of critical customer interactions annually, CSG Systems (NASDAQ:CSGS) provides cloud-based software platforms that help companies manage customer interactions, process payments, and monetize their services.

Why Do We Avoid CSGS?

1. Annual revenue growth of 3.4% over the last two years was below our standards for the business services sector
2. Projected sales growth of 2.5% for the next 12 months suggests sluggish demand
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

At $67.33 per share, CSG trades at 13.8x forward P/E. Dive into our free research report to see why there are better opportunities than CSGS.

High-Quality Stocks for All Market Conditions

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 6 Stocks for this week. 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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.