Value investing has created more billionaires than any other strategy, like Warren Buffett, who built his fortune 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.

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. That said, here are three value stocks with poor fundamentals and some alternatives you should consider instead.

Bandwidth (BAND)

Forward P/S Ratio: 0.6x

Started in 1999 by David Morken who was later joined by Henry Kaestner as co-founder in 2001, Bandwidth (NASDAQ:BAND) provides thousands of customers with a software platform that uses its own global network to provide phone numbers, voice, and text connectivity.

Why Do We Avoid BAND?

1. Annual revenue growth of 15.1% over the last three years was below our standards for the software sector
2. Projected sales are flat for the next 12 months, implying demand will slow from its three-year trend
3. Bad unit economics and steep infrastructure costs are reflected in its gross margin of 37.4%, one of the worst among software companies

At $15.25 per share, Bandwidth trades at 0.6x forward price-to-sales. Check out our free in-depth research report to learn more about why BAND doesn’t pass our bar.

Solo Brands (DTC)

Forward P/E Ratio: 1.9x

Started through a Kickstarter campaign, Solo Brands (NYSE:DTC) is a provider of outdoor and recreational products.

Why Do We Think DTC Will Underperform?

1. Annual revenue declines of 2.1% over the last two years indicate problems with its market positioning
2. Performance over the past four years shows its incremental sales were much less profitable, as its earnings per share fell by 18.1% annually
3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

Solo Brands is trading at $0.72 per share, or 1.9x forward price-to-earnings. To fully understand why you should be careful with DTC, check out our full research report (it’s free).

Oshkosh (OSK)

Forward P/E Ratio: 9x

Oshkosh (NYSE:OSK) manufactures specialty vehicles for the defense, fire, emergency, and commercial industry, operating various brand subsidiaries within each industry.

Why Does OSK Fall Short?

1. New orders were hard to come by as its average backlog growth of 7.5% over the past two years underwhelmed
2. Estimated sales decline of 1.8% for the next 12 months implies a challenging demand environment
3. Free cash flow margin shrank by 8.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

Oshkosh’s stock price of $95.37 implies a valuation ratio of 9x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than OSK.

Stocks We Like More

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Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.