3 Value Stocks Skating on Thin Ice

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.

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.

Comcast (CMCSA)

Forward P/E Ratio: 8.1x

Formerly known as American Cable Systems, Comcast (NASDAQ:CMCSA) is a multinational telecommunications company offering a wide range of services.

Why Do We Think CMCSA Will Underperform?

1. Demand for its offerings was relatively low as its number of domestic broadband customers has underwhelmed
2. Demand is forecasted to shrink as its estimated sales for the next 12 months are flat
3. Underwhelming 8.8% return on capital reflects management’s difficulties in finding profitable growth opportunities

At $35.52 per share, Comcast trades at 8.1x forward P/E. Read our free research report to see why you should think twice about including CMCSA in your portfolio.

Fortune Brands (FBIN)

Forward P/E Ratio: 12.3x

Targeting a wide customer base of residential and commercial customers, Fortune Brands (NYSE:FBIN) makes plumbing, security, and outdoor living products.

Why Should You Dump FBIN?

1. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
2. Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 7.8 percentage points
3. Earnings per share fell by 12.9% annually over the last two years while its revenue was flat, showing each sale was less profitable

Fortune Brands is trading at $52.84 per share, or 12.3x forward P/E. Dive into our free research report to see why there are better opportunities than FBIN.

Rithm Capital (RITM)

Forward P/B Ratio: 0.9x

Formed through the 2022 rebranding of New Residential Investment Corp., Rithm Capital (NYSE:RITM) is a global asset manager that invests in real estate, credit, and financial services, with significant operations in mortgage origination and servicing.

Why Do We Avoid RITM?

1. Sales trends were unexciting over the last two years as its 4.7% annual growth was below the typical bank company
2. Incremental sales over the last five years were less profitable as its earnings per share were flat while its revenue grew
3. Muted 1.5% annual tangible book value per share growth over the last two years shows its capital generation lagged behind its bank peers

Rithm Capital’s stock price of $11.40 implies a valuation ratio of 0.9x forward P/B. To fully understand why you should be careful with RITM, check out our full research report (it’s free).

Stocks We Like More

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 9 Market-Beating Stocks. 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 Kadant (+351% five-year return). Find your next big winner with StockStory today for free.