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.
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.
Paramount (PARA)
Forward P/E Ratio: 8.7x
Owner of Spongebob Squarepants and formerly known as ViacomCBS, Paramount Global (NASDAQ:PARA) is a major media conglomerate offering television, film production, and digital content across various global platforms.
Why Should You Sell PARA?
- Annual sales declines of 2% for the past two years show its products and services struggled to connect with the market
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 23.5% annually while its revenue grew
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Paramount is trading at $11.75 per share, or 8.7x forward P/E. Check out our free in-depth research report to learn more about why PARA doesn’t pass our bar.
Hillenbrand (HI)
Forward P/E Ratio: 8x
Hillenbrand, Inc. (NYSE: HI) is an industrial company that designs, manufactures, and sells highly engineered processing equipment and solutions for various industries.
Why Do We Avoid HI?
- 7.2% annual revenue growth over the last five years was slower than its industrials peers
- Incremental sales over the last two years were much less profitable as its earnings per share fell by 5.9% annually while its revenue grew
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 14.7 percentage points
At $20.41 per share, Hillenbrand trades at 8x forward P/E. If you’re considering HI for your portfolio, see our FREE research report to learn more.
ePlus (PLUS)
Forward P/E Ratio: 13.9x
Starting as a financing company in 1990 before evolving into a full-service technology provider, ePlus (NASDAQ:PLUS) provides comprehensive IT solutions, professional services, and financing options to help organizations optimize their technology infrastructure and supply chain processes.
Why Do We Pass on PLUS?
- Sales stagnated over the last two years and signal the need for new growth strategies
- Earnings per share have dipped by 3.7% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Low returns on capital reflect management’s struggle to allocate funds effectively, and its shrinking returns suggest its past profit sources are losing steam
ePlus’s stock price of $62.55 implies a valuation ratio of 13.9x forward P/E. To fully understand why you should be careful with PLUS, check out our full research report (it’s free).
Stocks We Like More
Trump’s April 2024 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound 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 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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