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.
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.
Tennant (TNC)
Forward P/E Ratio: 11.5x
As the world’s largest manufacturer of autonomous mobile robots, Tennant (NYSE: TNC) designs, manufactures, and sells cleaning products to various sectors.
Why Is TNC Not Exciting?
- Annual revenue growth of 2.3% over the last five years was below our standards for the industrials sector
- Sales are projected to tank by 1% over the next 12 months as demand evaporates
- Free cash flow margin dropped by 7.1 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Tennant’s stock price of $71.48 implies a valuation ratio of 11.5x forward P/E. Check out our free in-depth research report to learn more about why TNC doesn’t pass our bar.
Neogen (NEOG)
Forward P/E Ratio: 11.3x
Founded in 1981 and operating at the intersection of food safety and animal health, Neogen (NASDAQ: NEOG) develops and manufactures diagnostic tests and related products to detect dangerous substances in food and pharmaceuticals for animal health.
Why Should You Dump NEOG?
- Earnings per share fell by 7.5% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
At $5.75 per share, Neogen trades at 11.3x forward P/E. Dive into our free research report to see why there are better opportunities than NEOG.
Organon (OGN)
Forward P/E Ratio: 2.5x
Spun off from Merck in 2021 to create a company dedicated to addressing unmet needs in women's health, Organon (NYSE: OGN) is a global healthcare company focused on improving women's health through prescription therapies, medical devices, biosimilars, and established medicines.
Why Should You Sell OGN?
- Annual sales declines of 3.8% for the past five years show its products and services struggled to connect with the market during this cycle
- Earnings per share have dipped by 18% annually over the past four years, which is concerning because stock prices follow EPS over the long term
- Free cash flow margin dropped by 28.9 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Organon is trading at $9.57 per share, or 2.5x forward P/E. To fully understand why you should be careful with OGN, check out our full research report (it’s free).
Stocks We Like More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio 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 United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.
