Value stocks typically trade at discounts to the broader market, offering patient investors the opportunity to buy businesses when they’re out of favor. The key risk, however, is that these stocks are usually cheap for a reason – five cents for a piece of fruit may seem like a great deal until you find out it’s rotten.
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. That said, here is one value stock trading at a big discount to its intrinsic value and two climbing an uphill battle.
Two Value Stocks to Sell:
Brinker International (EAT)
Forward P/E Ratio: 13.9x
Founded by Norman Brinker in Dallas, Brinker International (NYSE: EAT) is a casual restaurant chain that operates the Chili’s, Maggiano’s Little Italy, and It’s Just Wings banners.
Why Does EAT Fall Short?
- Slow expansion of restaurants indicates a strategic shift toward maximizing returns from existing locations
- Estimated sales growth of 4.2% for the next 12 months implies demand will slow from its six-year trend
- Gross margin of 17.7% is below its competitors, leaving less money for marketing and promotions
Brinker International is trading at $151.12 per share, or 13.9x forward P/E. To fully understand why you should be careful with EAT, check out our full research report (it’s free).
ScanSource (SCSC)
Forward P/E Ratio: 9x
Operating as a crucial link in the technology supply chain since 1992, ScanSource (NASDAQ: SCSC) is a hybrid distributor that connects hardware, software, and cloud services from technology suppliers to resellers and business customers.
Why Are We Wary of SCSC?
- Annual sales declines of 8.6% for the past two years show its products and services struggled to connect with the market during this cycle
- Estimated sales growth of 3% for the next 12 months is soft and implies weaker demand
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 2.6% for the last five years
ScanSource’s stock price of $38.57 implies a valuation ratio of 9x forward P/E. Read our free research report to see why you should think twice about including SCSC in your portfolio.
One Value Stock to Buy:
Instacart (CART)
Forward EV/EBITDA Ratio: 8.3x
Powering more than one billion grocery orders since its founding, Instacart (NASDAQ: CART) is an online grocery shopping and delivery platform that partners with retailers to help customers shop from local stores through its app or website.
Why Is CART a Top Pick?
- Prominent and differentiated platform leads to a top-tier gross margin of 74.4%
- Excellent EBITDA margin of 27.7% highlights the efficiency of its business model, and its rise over the last few years was fueled by some leverage on its fixed costs
- Free cash flow margin expanded by 14.4 percentage points over the last few years, providing additional flexibility for investments and share buybacks/dividends
At $41.78 per share, Instacart trades at 8.3x forward EV/EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn't over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
