3 Value Stocks in Hot Water

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.

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. That said, here are three value stocks with poor fundamentals and some alternatives you should consider instead.

VF Corp (VFC)

Forward P/E Ratio: 11.4x

Owner of The North Face, Vans, and Supreme, VF Corp (NYSE:VFC) is a clothing conglomerate specializing in branded lifestyle apparel, footwear, and accessories.

Why Do We Think VFC Will Underperform?

1. Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
2. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
3. 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

VF Corp’s stock price of $11.81 implies a valuation ratio of 11.4x forward P/E. To fully understand why you should be careful with VFC, check out our full research report (it’s free).

Sirius XM (SIRI)

Forward P/E Ratio: 7.2x

Known for its commercial-free music channels, Sirius XM (NASDAQ:SIRI) is a broadcasting company that provides satellite radio and online radio services across North America.

Why Do We Pass on SIRI?

1. Performance surrounding its core subscribers has lagged its peers
2. Incremental sales over the last five years were much less profitable as its earnings per share fell by 36.6% annually while its revenue grew
3. Waning returns on capital imply its previous profit engines are losing steam

At $21.48 per share, Sirius XM trades at 7.2x forward P/E. If you’re considering SIRI for your portfolio, see our FREE research report to learn more.

Genpact (G)

Forward P/E Ratio: 11.7x

Originally spun off from General Electric in 2005 to provide business process services, Genpact (NYSE:G) is a global professional services firm that helps businesses transform their operations through digital technology, AI, and data analytics solutions.

Why Does G Worry Us?

1. Estimated sales growth of 3.4% for the next 12 months implies demand will slow from its two-year trend
2. Earnings per share lagged its peers over the last two years as they only grew by 9.4% annually
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 4 percentage points

Genpact is trading at $42.03 per share, or 11.7x forward P/E. Dive into our free research report to see why there are better opportunities than G.

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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today