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 poor fundamentals and some alternatives you should consider instead.
Commerce (CMRC)
Forward P/S Ratio: 0.8x
As a founding member of the MACH Alliance advocating for modern tech standards, Commerce (NASDAQ: CMRC) provides a SaaS platform that enables businesses to build and manage online stores, connect with marketplaces, and integrate with point-of-sale systems.
Why Do We Think CMRC Will Underperform?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 3.1% underwhelmed
- Projected sales decline of 3.2% for the next 12 months points to a tough demand environment ahead
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Commerce’s stock price of $3.22 implies a valuation ratio of 0.8x forward price-to-sales. Check out our free in-depth research report to learn more about why CMRC doesn’t pass our bar.
Tennant (TNC)
Forward P/E Ratio: 13.4x
As the world’s largest manufacturer of autonomous mobile robots, Tennant (NYSE: TNC) designs, manufactures, and sells cleaning products to various sectors.
Why Do We Pass on TNC?
- Annual sales declines of 1.7% for the past two years show its products and services struggled to connect with the market during this cycle
- Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
At $65.94 per share, Tennant trades at 13.4x forward P/E. If you’re considering TNC for your portfolio, see our FREE research report to learn more.
NESR (NESR)
Forward P/E Ratio: 11.3x
Operating across 16 countries from Algeria to Indonesia, NESR (NASDAQ: NESR) provides oilfield services like hydraulic fracturing, cementing, and drilling to oil and gas companies.
Why Does NESR Fall Short?
- Smaller revenue base of $1.62 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Gross margin of 12.8% reflects its high production costs and unfavorable asset base
- Costs have risen faster than its revenue over the last five years, causing its EBITDA margin to decline by 74.1 percentage points
NESR is trading at $23.30 per share, or 11.3x forward P/E. Read our free research report to see why you should think twice about including NESR in your portfolio.
Stocks We Like More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
