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.
Penguin Solutions (PENG)
Forward P/E Ratio: 8.5x
Based in the US, Penguin Solutions (NASDAQ: PENG) is a diversified semiconductor company offering memory, digital, and LED products.
Why Should You Sell PENG?
- Annual revenue growth of 3.7% over the last five years was below our standards for the semiconductor sector
- Gross margin of 28.8% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 6.1% for the last two years
Penguin Solutions is trading at $19.71 per share, or 8.5x forward P/E. Dive into our free research report to see why there are better opportunities than PENG.
Leggett & Platt (LEG)
Forward P/E Ratio: 10.9x
Founded in 1883, Leggett & Platt (NYSE: LEG) is a diversified manufacturer of products and components for various industries.
Why Are We Out on LEG?
- Sales were flat over the last five years, indicating it’s failed to expand its business
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $12.05 per share, Leggett & Platt trades at 10.9x forward P/E. Read our free research report to see why you should think twice about including LEG in your portfolio.
HA Sustainable Infrastructure Capital (HASI)
Forward P/E Ratio: 11.3x
With a proprietary "CarbonCount" metric that quantifies the environmental impact of each dollar invested, HA Sustainable Infrastructure Capital (NYSE: HASI) is an investment firm that finances and develops climate-positive infrastructure projects across renewable energy, energy efficiency, and ecological restoration.
Why Are We Wary of HASI?
- Low return on equity reflects management’s struggle to allocate funds effectively
- 29× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
HA Sustainable Infrastructure Capital’s stock price of $32.97 implies a valuation ratio of 11.3x forward P/E. To fully understand why you should be careful with HASI, check out our full research report (it’s free).
High-Quality Stocks for All Market Conditions
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 Growth Stocks for this month. 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.
