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 is one value stock trading at a big discount to its intrinsic value and two with little support.
Two Value Stocks to Sell:
Paramount (PSKY)
Forward P/E Ratio: 12.3x
Owner of Spongebob Squarepants and formerly known as ViacomCBS, Paramount Global (NASDAQ:PARA) is a major media conglomerate offering television, film production, and digital content across various global platforms.
Why Is PSKY Risky?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 3.2% over the last five years was below our standards for the consumer discretionary sector
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 4.9 percentage points over the next year
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $10.46 per share, Paramount trades at 12.3x forward P/E. Check out our free in-depth research report to learn more about why PSKY doesn’t pass our bar.
Meritage Homes (MTH)
Forward P/E Ratio: 12.9x
Originally founded in 1985 in Arizona as Monterey Homes, Meritage Homes (NYSE:MTH) is a homebuilder specializing in designing and constructing energy-efficient and single-family homes in the US.
Why Do We Think MTH Will Underperform?
- Product roadmap and go-to-market strategy need to be reconsidered as its backlog has averaged 34.5% declines over the past two years
- Earnings per share have dipped by 19.3% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Eroding returns on capital suggest its historical profit centers are aging
Meritage Homes is trading at $75.51 per share, or 12.9x forward P/E. Dive into our free research report to see why there are better opportunities than MTH.
One Value Stock to Buy:
MediaAlpha (MAX)
Forward P/E Ratio: 7.4x
Powering nearly 10 million consumer referrals each month in the insurance marketplace, MediaAlpha (NYSE:MAX) operates a technology platform that connects insurance carriers with high-intent consumers shopping for property, casualty, health, and life insurance products.
Why Should You Buy MAX?
- Annual revenue growth of 68.6% over the past two years was outstanding, reflecting market share gains this cycle
- Free cash flow margin grew by 5.1 percentage points over the last five years, giving the company more chips to play with
- Returns on capital are growing as management capitalizes on its market opportunities
MediaAlpha’s stock price of $8.62 implies a valuation ratio of 7.4x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged 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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.