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.
This distinction between true value and value traps can challenge even the most skilled investors. Luckily for you, we started StockStory to help you uncover exceptional companies. Keeping that in mind, here are three value stocks with poor fundamentals and some alternatives you should consider instead.
Semrush (SEMR)
Forward P/S Ratio: 2.1x
Born from the need to make sense of the complex digital marketing landscape, Semrush (NYSE: SEMR) is a software-as-a-service platform that helps companies improve their online visibility, analyze digital marketing efforts, and optimize content across search engines and social media.
Why Does SEMR Fall Short?
- Customers generally do not adopt complementary products as its 106% net revenue retention rate lags behind the industry standard
- Efficiency fell over the last year as its operating margin declined by 4.3 percentage points because it pursued growth instead of profits
- Low free cash flow margin of 9.7% for the last year gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
Semrush is trading at $6.78 per share, or 2.1x forward price-to-sales. To fully understand why you should be careful with SEMR, check out our full research report (it’s free for active Edge members).
Insight Enterprises (NSIT)
Forward P/E Ratio: 8.9x
With over 35 years of IT expertise and partnerships with more than 8,000 technology providers, Insight Enterprises (NASDAQ: NSIT) provides end-to-end digital transformation solutions that help businesses modernize their IT infrastructure and maximize the value of technology.
Why Is NSIT Risky?
- Flat sales over the last five years suggest it must find different ways to grow during this cycle
- Projected sales for the next 12 months are flat and suggest demand will be subdued
- Earnings per share lagged its peers over the last two years as they only grew by 1.9% annually
Insight Enterprises’s stock price of $88.64 implies a valuation ratio of 8.9x forward P/E. Check out our free in-depth research report to learn more about why NSIT doesn’t pass our bar.
Franklin BSP Realty Trust (FBRT)
Forward P/B Ratio: 0.7x
Operating as a specialized real estate investment trust (REIT) with roots dating back to 2012, Franklin BSP Realty Trust (NYSE: FBRT) originates and manages a diversified portfolio of commercial real estate debt investments secured by properties in the United States and abroad.
Why Do We Steer Clear of FBRT?
- Muted 4.2% annual revenue growth over the last two years shows its demand lagged behind its banking peers
- Incremental sales over the last two years were much less profitable as its earnings per share fell by 39.7% annually while its revenue grew
- Annual tangible book value per share declines of 6.8% for the past five years show its capital management struggled during this cycle
At $10.13 per share, Franklin BSP Realty Trust trades at 0.7x forward P/B. Read our free research report to see why you should think twice about including FBRT in your portfolio.
High-Quality Stocks for All Market Conditions
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 Strong Momentum Stocks for this week. 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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