3 Value Stocks in the Doghouse

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

Accel Entertainment (ACEL)

Forward P/E Ratio: 10.2x

Established in Illinois, Accel Entertainment (NYSE:ACEL) is a provider of electronic gaming machines and interactive amusement terminals to bars and entertainment venues.

Why Does ACEL Worry Us?

1. Sales trends were unexciting over the last two years as its 12.7% annual growth was below the typical consumer discretionary company
2. Estimated sales growth of 6.1% for the next 12 months implies demand will slow from its two-year trend
3. Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital

Accel Entertainment’s stock price of $10 implies a valuation ratio of 10.2x forward price-to-earnings. Read our free research report to see why you should think twice about including ACEL in your portfolio.

Pfizer (PFE)

Forward P/E Ratio: 8.8x

With roots dating back to 1849 when two German immigrants opened a fine chemicals business in Brooklyn, Pfizer (NYSE:PFE) is a global biopharmaceutical company that discovers, develops, manufactures, and sells medicines and vaccines for a wide range of diseases and conditions.

Why Are We Hesitant About PFE?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 10.2 percentage points
3. Diminishing returns on capital suggest its earlier profit pools are drying up

At $25.72 per share, Pfizer trades at 8.8x forward price-to-earnings. If you’re considering PFE for your portfolio, see our FREE research report to learn more.

Crane NXT (CXT)

Forward P/E Ratio: 12.4x

Born from a corporate transformation completed in 2023, Crane NXT (NYSE:CXT) provides specialized technology solutions for payment processing, banknote security, and authentication systems for financial institutions and businesses.

Why Should You Dump CXT?

1. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
2. Estimated sales growth of 2.2% for the next 12 months implies demand will slow from its two-year trend
3. Incremental sales over the last two years were less profitable as its earnings per share were flat while its revenue grew

Crane NXT is trading at $52.11 per share, or 12.4x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than CXT.

Stocks We Like More

With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run - and we’re laser-focused on finding the best stocks for this upcoming cycle.

Put yourself in the driver’s seat 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 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 Axon (+711% five-year return). Find your next big winner with StockStory today for free.