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. Keeping that in mind, here are three value stocks climbing an uphill battle and some other investments you should look into instead.
Calavo (CVGW)
Forward P/E Ratio: 15.6x
A trailblazer in the avocado industry, Calavo Growers (NASDAQ: CVGW) is a pioneering California-based provider of high-quality avocados and other fresh food products.
Why Is CVGW Not Exciting?
- Annual revenue declines of 14.7% over the last three years indicate problems with its market positioning
- Modest revenue base of $688.3 million gives it less fixed cost leverage and fewer distribution channels than larger companies
- Commoditized products, bad unit economics, and high competition are reflected in its low gross margin of 10.6%
Calavo’s stock price of $26.46 implies a valuation ratio of 15.6x forward P/E. Check out our free in-depth research report to learn more about why CVGW doesn’t pass our bar.
Campbell's (CPB)
Forward P/E Ratio: 10.7x
With its iconic canned soup as its cornerstone product, Campbell's (NASDAQ: CPB) is a packaged food company with an illustrious portfolio of brands.
Why Does CPB Worry Us?
- Shrinking unit sales over the past two years suggest it might have to lower prices to stimulate growth
- Estimated sales growth of 1.2% for the next 12 months implies demand will slow from its three-year trend
- Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 2.9 percentage points
Campbell's is trading at $34.40 per share, or 10.7x forward P/E. Dive into our free research report to see why there are better opportunities than CPB.
Edgewell Personal Care (EPC)
Forward P/E Ratio: 8.5x
Boasting brands such as Banana Boat, Schick, and Skintimate, Edgewell Personal Care (NYSE: EPC) sells personal care products in the skin and sun care, shave, and feminine care categories.
Why Do We Avoid EPC?
- 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
- Capital intensity has ramped up over the last year as its free cash flow margin decreased by 8.3 percentage points
- Low returns on capital reflect management’s struggle to allocate funds effectively
At $28.06 per share, Edgewell Personal Care trades at 8.5x forward P/E. If you’re considering EPC for your portfolio, see our FREE research report to learn more.
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.
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