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 three value stocks climbing an uphill battle and some other investments you should look into instead.
Kontoor Brands (KTB)
Forward P/E Ratio: 12.6x
Founded in 2019 after separating from VF Corporation, Kontoor Brands (NYSE:KTB) is a clothing company known for its high-quality denim products.
Why Do We Think KTB Will Underperform?
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 13% for the last two years
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Kontoor Brands is trading at $74.35 per share, or 12.6x forward P/E. Check out our free in-depth research report to learn more about why KTB doesn’t pass our bar.
Graphic Packaging Holding (GPK)
Forward P/E Ratio: 8.7x
Founded in 1991, Graphic Packaging (NYSE:GPK) is a provider of paper-based packaging solutions for a wide range of products.
Why Do We Avoid GPK?
- Declining unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
- Estimated sales for the next 12 months are flat and imply a softer demand environment
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
Graphic Packaging Holding’s stock price of $16.18 implies a valuation ratio of 8.7x forward P/E. To fully understand why you should be careful with GPK, check out our full research report (it’s free for active Edge members).
PennyMac Mortgage Investment Trust (PMT)
Forward P/B Ratio: 0.8x
Operating as a real estate investment trust since 2009 to maintain tax advantages, PennyMac Mortgage Investment Trust (NYSE:PMT) is a specialty finance company that invests in mortgage-related assets and operates a correspondent lending business.
Why Should You Dump PMT?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 21.6% annually over the last five years
- Earnings per share have dipped by 9% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Products and services are facing significant credit quality challenges during this cycle as tangible book value per share has declined by 5.2% annually over the last five years
At $12.82 per share, PennyMac Mortgage Investment Trust trades at 0.8x forward P/B. If you’re considering PMT for your portfolio, see our FREE research report to learn more.
Stocks We Like More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% 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
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.