3 Value Stocks We Steer Clear Of

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, and a low valuation can reflect underlying business challenges rather than a genuine bargain.

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 facing an uphill battle and some other investments you should look into instead.

Asana (ASAN)

Forward P/S Ratio: 2.6x

Born from the founders’ frustration with the inefficiencies of email-based collaboration at Facebook, Asana (NYSE:ASAN) provides a work management platform that helps organizations track projects, set goals, and manage workflows in a centralized digital workspace.

Why Do We Think ASAN Will Underperform?

1. ARR growth averaged a weak 9.5% over the last year, suggesting that competition is pulling some attention away from its software

2. Customers have churned over the last year due to the commoditized nature of its software, as reflected in its 96.5% net revenue retention rate

3. Prolonged sales cycles signal certain parts of its software must be customized for its large enterprise clients, impeding customer growth

Asana is trading at $10.63 per share, or 2.6x forward price-to-sales. Check out our free in-depth research report to learn more about why ASAN doesn’t pass our bar.

General Motors (GM)

Forward P/E Ratio: 5.8x

Founded in 1908 by William C. Durant, General Motors (NYSE:GM) offers a range of vehicles and automobiles through brands such as Chevrolet, Buick, GMC, and Cadillac.

Why Is GM Not Exciting?

1. The company has faced growth challenges as its 1.2% annual revenue increases over the last two years fell short of other industrials companies

2. Gross margin of 11.5% is below its competitors, leaving less money to invest in areas like marketing and R&D

3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

General Motors’s stock price of $77.20 implies a valuation ratio of 5.8x forward P/E. If you’re considering GM for your portfolio, see our FREE research report to learn more.

F.N.B. Corporation (FNB)

Forward P/B Ratio: 0.9x

Tracing its roots back to 1864 during the Civil War era, F.N.B. Corporation (NYSE:FNB) is a diversified financial services holding company that provides banking, wealth management, and insurance services to consumers and businesses across seven states and Washington, D.C.