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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.

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.

SMART (SGH)

Forward P/E Ratio: 10.9x

Based in the US, SMART Global Holdings (NASDAQ:SGH) is a diversified semiconductor company offering memory, digital, and LED products.

Why Do We Avoid SGH?

1. Flat sales over the last five years suggest it must find different ways to grow during this cycle

2. Operating margin of 1% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments

3. Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its shrinking returns suggest its past profit sources are losing steam

At $21 per share, SMART trades at 10.9x forward price-to-earnings. If you’re considering SGH for your portfolio, see our FREE research report to learn more .

Manitowoc (MTW)

Forward P/E Ratio: 11.9x

Contracted by the United States Navy during WWII, Manitowoc (NYSE:MTW) provides cranes and lifting equipment.

Why Are We Out on MTW?

1. Demand cratered as it couldn’t win new orders over the past two years, leading to an average 9.6% decline in its backlog

2. Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term

3. Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital

Manitowoc is trading at $9.26 per share, or 11.9x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than MTW .

Biogen (BIIB)

Forward P/E Ratio: 8.7x

Founded in 1978 and pioneering treatments for some of medicine's most complex challenges, Biogen (NASDAQ:BIIB) develops and markets therapies for neurological conditions, including multiple sclerosis, Alzheimer's disease, spinal muscular atrophy, and rare diseases.

Why Do We Think BIIB Will Underperform?

1. Annual sales declines of 7.6% for the past five years show its products and services struggled to connect with the market during this cycle

2. Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 13.3% annually, worse than its revenue

3. Waning returns on capital imply its previous profit engines are losing steam

Biogen’s stock price of $142 implies a valuation ratio of 8.7x forward price-to-earnings. To fully understand why you should be careful with BIIB, 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 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 Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free .