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. Keeping that in mind, here are three value stocks with poor fundamentals and some alternatives you should consider instead.
RE/MAX (RMAX)
Forward P/E Ratio: 6.1x
Short for Real Estate Maximums, RE/MAX (NYSE:RMAX) operates a real estate franchise network spanning over 100 countries and territories.
Why Are We Out on RMAX?
- Performance surrounding its agents has lagged its peers
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 8.9% annually
- Breakeven ROIC (0%) reflects management’s challenges in identifying attractive investment opportunities
RE/MAX’s stock price of $7.80 implies a valuation ratio of 6.1x forward P/E. If you’re considering RMAX for your portfolio, see our FREE research report to learn more.
American Airlines (AAL)
Forward P/E Ratio: 7.5x
One of the ‘Big Four’ airlines in the US, American Airlines (NASDAQ:AAL) is a major global air carrier that serves both business and leisure travelers through its domestic and international flights.
Why Do We Steer Clear of AAL?
- Demand for its offerings was relatively low as its number of revenue passenger miles has underwhelmed
- Underwhelming 0.8% return on capital reflects management’s difficulties in finding profitable growth opportunities
- High net-debt-to-EBITDA ratio of 6× could force the company to raise capital at unfavorable terms if market conditions deteriorate
At $10.78 per share, American Airlines trades at 7.5x forward P/E. Read our free research report to see why you should think twice about including AAL in your portfolio.
TaskUs (TASK)
Forward P/E Ratio: 12x
Starting as a virtual assistant service in 2008 before evolving into a global digital services provider, TaskUs (NASDAQ:TASK) provides outsourced digital services including customer experience management, content moderation, and AI data services to innovative technology companies.
Why Is TASK Not Exciting?
- Muted 1.8% annual revenue growth over the last two years shows its demand lagged behind its business services peers
- Earnings per share have contracted by 4% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
TaskUs is trading at $16.70 per share, or 12x forward P/E. Check out our free in-depth research report to learn more about why TASK doesn’t pass our bar.
Stocks We Like More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 6 Stocks for this week. 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 Kadant (+351% five-year return). Find your next big winner with StockStory today for free.