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.
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. Keeping that in mind, here is one value stock trading at a big discount to its intrinsic value and two best left ignored.
Two Value Stocks to Sell:
Sprinklr (CXM)
Forward P/S Ratio: 2.7x
Initially focused only on social media management, Sprinklr (NYSE: CXM) is a leading provider of unified customer experience management software.
Why Does CXM Give Us Pause?
- Offerings struggled to generate meaningful interest as its average billings growth of 5.5% over the last year did not impress
- Estimated sales growth of 3.3% for the next 12 months implies demand will slow from its three-year trend
- Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 1.6 percentage points
Sprinklr is trading at $8.35 per share, or 2.7x forward price-to-sales. Read our free research report to see why you should think twice about including CXM in your portfolio.
GXO Logistics (GXO)
Forward P/E Ratio: 12.9x
With notable customers such as Nike and Apple, GXO (NYSE: GXO) manages outsourced supply chains and warehousing for various companies.
Why Is GXO Not Exciting?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Earnings per share were flat over the last two years and fell short of the peer group average
- High net-debt-to-EBITDA ratio of 6× increases the risk of forced asset sales or dilutive financing if operational performance weakens
GXO Logistics’s stock price of $39.08 implies a valuation ratio of 12.9x forward price-to-earnings. If you’re considering GXO for your portfolio, see our FREE research report to learn more.
One Value Stock to Watch:
Allison Transmission (ALSN)
Forward P/E Ratio: 10.9x
Helping build race cars at one point, Allison Transmission (NYSE: ALSN) offers transmissions to original equipment manufacturers and fleet operators.
Why Do We Like ALSN?
- Offerings are difficult to replicate at scale and lead to a best-in-class gross margin of 47.8%
- Share repurchases over the last two years enabled its annual earnings per share growth of 22% to outpace its revenue gains
- ALSN is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
At $95.67 per share, Allison Transmission trades at 10.9x forward price-to-earnings. Is now the time to initiate a position? See for yourself in our full 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 United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.
