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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.

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 are three value stocks climbing an uphill battle and some other investments you should look into instead.

Lovesac (LOVE)

Forward P/E Ratio: 10.2x

Known for its oversized, premium beanbags, Lovesac (NASDAQ:LOVE) is a specialty furniture brand selling modular furniture.

Why Are We Hesitant About LOVE?

1. Sales trends were unexciting over the last two years as its 6.4% annual growth was below the typical consumer discretionary company

2. Estimated sales growth of 1.4% for the next 12 months implies demand will slow from its two-year trend

3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Lovesac’s stock price of $15.95 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 LOVE in your portfolio, it’s free .

Hilton Grand Vacations (HGV)

Forward P/E Ratio: 11.3x

Spun off from Hilton Worldwide in 2017, Hilton Grand Vacations (NYSE:HGV) is a global timeshare company that provides travel experiences for its customers through its timeshare resorts and club membership programs.

Why Are We Wary of HGV?

1. Annual revenue growth of 14% over the last two years was below our standards for the consumer discretionary sector

2. Below-average returns on capital indicate management struggled to find compelling investment opportunities

3. 13× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

At $35.12 per share, Hilton Grand Vacations trades at 11.3x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than HGV .

Hillenbrand (HI)

Forward P/E Ratio: 8.2x

Hillenbrand, Inc. (NYSE: HI) is an industrial company that designs, manufactures, and sells highly engineered processing equipment and solutions for various industries.

Why Do We Think HI Will Underperform?

1. Incremental sales over the last two years were much less profitable as its earnings per share fell by 7% annually while its revenue grew

2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 8.6 percentage points

3. Diminishing returns on capital suggest its earlier profit pools are drying up

Hillenbrand is trading at $25.30 per share, or 8.2x forward price-to-earnings. To fully understand why you should be careful with HI, check out our full research report (it’s free) .

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 6 Stocks for this week . 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 Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free .