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.
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 little support and some other investments you should consider instead.
LKQ (LKQ)
Forward P/E Ratio: 10.1x
A global distributor of vehicle parts and accessories, LKQ (NASDAQ:LKQ) offers its customers a comprehensive selection of high-quality, affordably priced automobile products.
Why Should You Dump LKQ?
- 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
- Estimated sales growth of 2% for the next 12 months implies demand will slow from its two-year trend
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
LKQ’s stock price of $37.02 implies a valuation ratio of 10.1x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than LKQ.
Marriott Vacations (VAC)
Forward P/E Ratio: 7.4x
Spun off from Marriott International in 1984, Marriott Vacations (NYSE:VAC) is a vacation company providing leisure experiences for travelers around the world.
Why Do We Steer Clear of VAC?
- Demand for its offerings was relatively low as its number of conducted tours has underwhelmed
- Underwhelming 5% return on capital reflects management’s difficulties in finding profitable growth opportunities
- 7× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Marriott Vacations is trading at $55.91 per share, or 7.4x forward price-to-earnings. Check out our free in-depth research report to learn more about why VAC doesn’t pass our bar.
MasterCraft (MCFT)
Forward P/E Ratio: 14.1x
Started by a waterskiing instructor, MasterCraft (NASDAQ:MCFT) specializes in designing, manufacturing, and selling sport boats.
Why Do We Think Twice About MCFT?
- Demand for its offerings was relatively low as its number of boats sold has underwhelmed
- Projected sales growth of 6.2% for the next 12 months suggests sluggish demand
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 26.6% annually, worse than its revenue
At $15.92 per share, MasterCraft trades at 14.1x forward price-to-earnings. If you’re considering MCFT for your portfolio, see our FREE research report to learn more.
Stocks We Like More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.