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.
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. Keeping that in mind, here is one value stock with strong fundamentals and two with little support.
Two Value Stocks to Sell:
Domo (DOMO)
Forward P/S Ratio: 1x
Founded by Josh James after selling his former business Omniture to Adobe, Domo (NASDAQ: DOMO) provides business intelligence software that allows managers to access and visualize critical business metrics in real-time, using their smartphones.
Why Should You Sell DOMO?
- Billings have dropped by 3.5% over the last year, suggesting it might have to lower prices to stimulate growth
- Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
At $8.29 per share, Domo trades at 1x forward price-to-sales. If you’re considering DOMO for your portfolio, see our FREE research report to learn more.
Endeavor (EDR)
Forward P/E Ratio: 14.4x
Owner of the UFC, WWE, and a client roster including Christian Bale, Endeavor (NYSE: EDR) is a diversified global entertainment, sports, and content company known for its talent representation and involvement in the entertainment industry.
Why Do We Think EDR Will Underperform?
- 9.5% annual revenue growth over the last five years was slower than its consumer discretionary peers
- Forecasted revenue decline of 1.8% for the upcoming 12 months implies demand will fall off a cliff
- ROIC of 0.2% reflects management’s challenges in identifying attractive investment opportunities
Endeavor is trading at $30.25 per share, or 14.4x forward price-to-earnings. Read our free research report to see why you should think twice about including EDR in your portfolio.
One Value Stock to Watch:
Expedia (EXPE)
Forward EV/EBITDA Ratio: 7.5x
Originally founded as a part of Microsoft, Expedia (NASDAQ: EXPE) is one of the world’s leading online travel agencies.
Why Are We Fans of EXPE?
- Room Nights Booked have increased by an average of 11% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features
- Prominent and differentiated platform culminates in a best-in-class gross margin of 88.6%
- Performance over the past three years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
Expedia’s stock price of $178.33 implies a valuation ratio of 7.5x forward EV-to-EBITDA. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
The Trump trade may have passed, but rates are still dropping and inflation is still cooling. Opportunities are ripe for those ready to act - and we’re here to help you pick them.
Get started 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.
