The low valuation multiples for value stocks provide a margin of safety that growth stocks rarely offer. However, the challenge lies in determining whether these cheap assets are genuinely undervalued or simply on sale due to their potentially deteriorating business models.
Identifying genuine bargains from value traps is something many investors struggle with, which is why we started StockStory - to help you find the best companies. Keeping that in mind, here is one value stock offering a compelling risk-reward profile and two climbing an uphill battle.
Two Value Stocks to Sell:
Sally Beauty (SBH)
Forward P/E Ratio: 7.7x
Catering to both everyday consumers as well as salon professionals, Sally Beauty (NYSE:SBH) is a retailer that sells salon-quality beauty products such as makeup and haircare products.
Why Should You Dump SBH?
- Lack of new stores suggest it’s attempting to increase revenue at existing locations because demand is sluggish
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Modest revenue base of $3.70 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
Sally Beauty is trading at $16.24 per share, or 7.7x forward P/E. Check out our free in-depth research report to learn more about why SBH doesn’t pass our bar.
Apogee (APOG)
Forward P/E Ratio: 9x
Involved in the design of the Apple Store on Fifth Avenue in New York City, Apogee (NASDAQ:APOG) sells architectural products and services such as high-performance glass for commercial buildings.
Why Do We Steer Clear of APOG?
- Annual sales declines of 1.3% for the past two years show its products and services struggled to connect with the market during this cycle
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 1%
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
Apogee’s stock price of $36.74 implies a valuation ratio of 9x forward P/E. To fully understand why you should be careful with APOG, check out our full research report (it’s free for active Edge members).
One Value Stock to Buy:
Merck (MRK)
Forward P/E Ratio: 12.5x
With roots dating back to 1891 and a portfolio that includes the blockbuster cancer immunotherapy Keytruda, Merck (NYSE:MRK) develops and sells prescription medicines, vaccines, and animal health products across oncology, infectious diseases, cardiovascular, and other therapeutic areas.
Why Is MRK a Top Pick?
- Enormous revenue base of $64.23 billion gives it economies of scale and advantages over new entrants due to the industry’s regulatory complexity
- Adjusted operating profits increased over the last two years as the company gained some leverage on its fixed costs and became more efficient
- Free cash flow margin grew by 5 percentage points over the last five years, giving the company more chips to play with
At $102.03 per share, Merck trades at 12.5x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even 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
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