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.
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 are two value stocks offering compelling risk-reward profiles and one facing an uphill battle.
One Value Stock to Sell:
Tyson Foods (TSN)
Forward P/E Ratio: 13x
Started as a simple trucking business, Tyson Foods (NYSE: TSN) is one of the world’s largest producers of chicken, beef, and pork.
Why Is TSN Risky?
- Flat unit sales over the past two years suggest it might have to lower prices to stimulate growth
- Commoditized products, bad unit economics, and high competition are reflected in its low gross margin of 7.1%
- Incremental sales over the last three years were much less profitable as its earnings per share fell by 3.8% annually while its revenue grew
Tyson Foods’s stock price of $58.10 implies a valuation ratio of 13x forward P/E. If you’re considering TSN for your portfolio, see our FREE research report to learn more.
Two Value Stocks to Watch:
Pfizer (PFE)
Forward P/E Ratio: 8.6x
With roots dating back to 1849 when two German immigrants opened a fine chemicals business in Brooklyn, Pfizer (NYSE: PFE) is a global biopharmaceutical company that discovers, develops, manufactures, and sells medicines and vaccines for a wide range of diseases and conditions.
Why Does PFE Stand Out?
- Enormous revenue base of $63.32 billion gives it economies of scale and advantages over new entrants due to the industry’s regulatory complexity
- Adjusted operating margin improvement of 19.2 percentage points over the last two years demonstrates its ability to scale efficiently
- ROIC punches in at 18.1%, illustrating management’s expertise in identifying profitable investments
Pfizer is trading at $24.23 per share, or 8.6x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.
Piper Sandler (PIPR)
Forward P/E Ratio: 15.2x
Tracing its roots back to 1895 and rebranded from Piper Jaffray in 2020, Piper Sandler (NYSE: PIPR) is an investment bank that provides advisory services, capital raising, institutional brokerage, and research for corporations, governments, and institutional investors.
Why Do We Like PIPR?
- Market share has increased this cycle as its 19.6% annual revenue growth over the last two years was exceptional
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 34.8% annually, topping its revenue gains
- ROE punches in at 15.3%, illustrating management’s expertise in identifying profitable investments
At $72.14 per share, Piper Sandler trades at 15.2x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
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