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.
This distinction between true value and value traps can challenge even the most skilled investors. Luckily for you, we started StockStory to help you uncover exceptional companies. That said, here are two value stocks with strong fundamentals and one with little support.
One Value Stock to Sell:
Gates Industrial Corporation (GTES)
Forward P/E Ratio: 13x
Helping create one of the most memorable moments for the iconic “Jurassic Park” film, Gates (NYSE:GTES) offers power transmission and fluid transfer equipment for various industries.
Why Are We Hesitant About GTES?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Projected sales for the next 12 months are flat and suggest demand will be subdued
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
At $19.84 per share, Gates Industrial Corporation trades at 13x forward price-to-earnings. To fully understand why you should be careful with GTES, check out our full research report (it’s free).
Two Value Stocks to Buy:
Blue Bird (BLBD)
Forward P/E Ratio: 8.5x
With around a century of experience, Blue Bird (NASDAQ:BLBD) is a manufacturer of school buses and complementary parts.
Why Are We Backing BLBD?
- Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 113% over the last two years outstripped its revenue performance
- Returns on capital are growing as management capitalizes on its market opportunities
Blue Bird’s stock price of $35.50 implies a valuation ratio of 8.5x forward price-to-earnings. Is now a good time to buy? Find out in our full research report, it’s free.
Elevance Health (ELV)
Forward P/E Ratio: 12.3x
Known for its Blue Cross and Blue Shield brand, Elevance Health (NYSE:EVH) is a health insurance company formerly known as Anthem.
Why Will ELV Outperform?
- Dominant market position is represented by its $177 billion in revenue, which gives it negotiating power over membership pricing and reimbursement rates
- Earnings growth has comfortably beaten the peer group average over the last five years as its EPS has compounded at 11.2% annually
- ROIC punches in at 22.5%, illustrating management’s expertise in identifying profitable investments
Elevance Health is trading at $421.48 per share, or 12.3x forward price-to-earnings. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market - and we’re zeroing in on the stocks that could benefit immensely.
Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. 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.