Value investing has produced some of the world’s most famous investing billionaires, including Warren Buffett, David Einhorn, and Seth Klarman, who built their fortunes 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 facing an uphill battle and some other investments you should look into instead.
BlackLine (BL)
Forward P/S Ratio: 2.8x
Born from the vision to eliminate tedious manual spreadsheet work for accountants, BlackLine (NASDAQ:BL) provides cloud-based software that automates and streamlines financial close, intercompany accounting, and invoice-to-cash processes for accounting departments.
Why Do We Steer Clear of BL?
- Offerings struggled to generate meaningful interest as its average billings growth of 7.3% over the last year did not impress
- Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment
- Operating margin was unchanged over the last year, suggesting it failed to gain leverage on its fixed costs
BlackLine is trading at $32.20 per share, or 2.8x forward price-to-sales. If you’re considering BL for your portfolio, see our FREE research report to learn more.
Cushman & Wakefield (CWK)
Forward P/E Ratio: 8.7x
With expertise in the commercial real estate sector, Cushman & Wakefield (NYSE:CWK) is a global Chicago-based real estate firm offering a comprehensive range of services to clients.
Why Are We Out on CWK?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 5.2% over the last five years was below our standards for the consumer discretionary sector
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 1.5% for the last two years
- Returns on capital haven’t budged, indicating management couldn’t drive additional value creation
At $13.40 per share, Cushman & Wakefield trades at 8.7x forward P/E. To fully understand why you should be careful with CWK, check out our full research report (it’s free).
Black Stone Minerals (BSM)
Forward P/E Ratio: 14.9x
With roots dating to the late 1800s when railroads were expanding westward and land grants were common, Black Stone Minerals (NYSE:BSM) owns oil and natural gas mineral rights across the U.S., earning royalties when energy companies drill on its land.
Why Are We Wary of BSM?
- Modest revenue base of $459.5 million gives it less fixed cost leverage and fewer distribution channels than larger companies
- Efficiency has decreased over the last five years as its EBITDA margin fell by 5.9 percentage points
Black Stone Minerals’s stock price of $14.92 implies a valuation ratio of 14.9x forward P/E. If you’re considering BSM for your portfolio, see our FREE research report to learn more.
Stocks We Like More
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.