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.

This distinction between true value and value traps can challenge even the most skilled investors. Luckily for you, we started StockStory to help you uncover exceptional companies. That said, here are three value stocks with little support and some other investments you should consider instead.

Northwest Pipe (NWPX)

Forward P/E Ratio: 11.2x

Playing a large role in the Integrated Pipeline (IPL) project in Texas to deliver ~350 million gallons of water per day, Northwest Pipe (NASDAQ:NWPX) is a manufacturer of pipeline systems for water infrastructure.

Why Is NWPX Not Exciting?

1. 5.2% annual revenue growth over the last two years was slower than its industrials peers
2. Sales are projected to remain flat over the next 12 months as demand decelerates from its two-year trend
3. Earnings per share have dipped by 2.1% annually over the past two years, which is concerning because stock prices follow EPS over the long term

Northwest Pipe’s stock price of $38.66 implies a valuation ratio of 11.2x forward P/E. If you’re considering NWPX for your portfolio, see our FREE research report to learn more.

Manitowoc (MTW)

Forward P/E Ratio: 15.1x

Contracted by the United States Navy during WWII, Manitowoc (NYSE:MTW) provides cranes and lifting equipment.

Why Do We Think MTW Will Underperform?

1. Backlog has dropped by 12.4% on average over the past two years, suggesting it’s losing orders as competition picks up
2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 41.8% annually
3. Low returns on capital reflect management’s struggle to allocate funds effectively

At $11.30 per share, Manitowoc trades at 15.1x forward P/E. Check out our free in-depth research report to learn more about why MTW doesn’t pass our bar.

Boise Cascade (BCC)

Forward P/E Ratio: 9.9x

Formed through the merger of two lumber companies, Boise Cascade Company (NYSE:BCC) manufactures and distributes wood products and other building materials.

Why Do We Pass on BCC?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 6.7% annually over the last two years
2. Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
3. Waning returns on capital imply its previous profit engines are losing steam

Boise Cascade is trading at $83.96 per share, or 9.9x forward P/E. Read our free research report to see why you should think twice about including BCC in your portfolio.

Stocks We Like More

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