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 are two value stocks trading at big discounts to their intrinsic values and one best left ignored.
One Value Stock to Sell:
Asana (ASAN)
Forward P/S Ratio: 2x
Born from the founders' frustration with the inefficiencies of email-based collaboration at Facebook, Asana (NYSE: ASAN) provides a work management platform that helps organizations track projects, set goals, and manage workflows in a centralized digital workspace.
Why Are We Out on ASAN?
- Average ARR growth of 9.6% over the last year has disappointed, suggesting it’s had a hard time winning long-term deals and renewals
- Net revenue retention rate of 96% shows it has a tough time retaining customers
- Software platform has intricate integration requirements for its enterprise clients, triggering long sales cycles that limit new customer additions
Asana’s stock price of $7.14 implies a valuation ratio of 2x forward price-to-sales. Check out our free in-depth research report to learn more about why ASAN doesn’t pass our bar.
Two Value Stocks to Buy:
Morningstar (MORN)
Forward P/E Ratio: 14.1x
Founded in 1984 by Joe Mansueto with just $80,000 in personal savings, Morningstar (NASDAQ: MORN) provides independent investment data, research, and analysis tools that help investors, advisors, and institutions make informed financial decisions.
Why Will MORN Outperform?
- Offerings and unique value proposition resonate with customers, as seen in its above-market 11.5% annual sales growth over the last five years
- Share repurchases over the last two years enabled its annual earnings per share growth of 40.7% to outpace its revenue gains
- Industry-leading 17.1% return on equity demonstrates management’s skill in finding high-return investments
Morningstar is trading at $165.15 per share, or 14.1x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.
EQT (EQT)
Forward P/E Ratio: 13x
The largest natural gas producer in the United States by daily volume, EQT (NYSE: EQT) produces natural gas and natural gas liquids from wells drilled in the Appalachian Basin.
Why Are We Bullish on EQT?
- Market share has increased this cycle as its 15.4% annual revenue growth over the last ten years was exceptional
- EBITDA profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
- Robust free cash flow margin of 29.6% gives it many options for capital deployment
At $51.33 per share, EQT trades at 13x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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