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.
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. That said, here is one value stock trading at a big discount to its intrinsic value and two best left ignored.
Two Value Stocks to Sell:
Steven Madden (SHOO)
Forward P/E Ratio: 10.1x
As seen in the infamous Wolf of Wall Street movie, Steven Madden (NASDAQ: SHOO) is a fashion brand famous for its trendy and innovative footwear, appealing to a young and style-conscious audience.
Why Does SHOO Give Us Pause?
- 3.7% annual revenue growth over the last two years was slower than its consumer discretionary peers
- Earnings per share lagged its peers over the last five years as they only grew by 6.8% annually
- Poor free cash flow margin of 9% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
Steven Madden is trading at $25.50 per share, or 10.1x forward price-to-earnings. To fully understand why you should be careful with SHOO, check out our full research report (it’s free).
ManpowerGroup (MAN)
Forward P/E Ratio: 12.6x
Founded during the post-World War II economic boom when businesses needed temporary workers, ManpowerGroup (NYSE: MAN) connects millions of people to employment opportunities through its global network of staffing, recruitment, and workforce management services.
Why Do We Think MAN Will Underperform?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Sales are projected to tank by 5.8% over the next 12 months as its demand continues evaporating
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 10% annually, worse than its revenue
ManpowerGroup’s stock price of $59.01 implies a valuation ratio of 12.6x forward price-to-earnings. Check out our free in-depth research report to learn more about why MAN doesn’t pass our bar.
One Value Stock to Watch:
Amentum (AMTM)
Forward P/E Ratio: 8.5x
With operations spanning approximately 80 countries and a workforce of specialized engineers and technical experts, Amentum Holdings (NYSE: AMTM) provides advanced engineering and technology solutions to U.S. government agencies, allied governments, and commercial enterprises across defense, energy, and space sectors.
Why Does AMTM Stand Out?
- Market share has increased this cycle as its 14.5% annual revenue growth over the last one years was exceptional
- Large revenue base of $13.92 billion and strong customer awareness give it distribution advantages
At $18.20 per share, Amentum trades at 8.5x forward price-to-earnings. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run - and we’re laser-focused on finding the best stocks for this upcoming cycle.
Put yourself in the driver’s seat by checking out our Top 5 Growth Stocks for this month. 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 Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.
