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 with strong fundamentals and two with little support.
Two Value Stocks to Sell:
BlackLine (BL)
Forward P/S Ratio: 2.4x
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 Should You Dump BL?
- Products, pricing, or go-to-market strategy may need some adjustments as its 8.5% average billings growth over the last year was weak
- Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low
- Operating margin was unchanged over the last year, suggesting it failed to gain leverage on its fixed costs
BlackLine is trading at $27.18 per share, or 2.4x forward price-to-sales. To fully understand why you should be careful with BL, check out our full research report (it’s free).
ScanSource (SCSC)
Forward P/E Ratio: 11.3x
Operating as a crucial link in the technology supply chain since 1992, ScanSource (NASDAQ: SCSC) is a hybrid distributor that connects hardware, software, and cloud services from technology suppliers to resellers and business customers.
Why Do We Think Twice About SCSC?
- Sales tumbled by 4.9% annually over the last two years, showing market trends are working against it during this cycle
- Estimated sales growth of 2.4% for the next 12 months is soft and implies weaker demand
- Low free cash flow margin of 3.4% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
ScanSource’s stock price of $49.67 implies a valuation ratio of 11.3x forward P/E. If you’re considering SCSC for your portfolio, see our FREE research report to learn more.
One Value Stock to Buy:
Federated Hermes (FHI)
Forward P/E Ratio: 11.6x
With roots dating back to 1955 and a pioneering role in money market funds, Federated Hermes (NYSE: FHI) is an investment management firm that offers a wide range of funds and strategies for institutional and individual investors.
Why Should You Buy FHI?
- Share repurchases over the last two years enabled its annual earnings per share growth of 21.1% to outpace its revenue gains
- Industry-leading 25.7% return on equity demonstrates management’s skill in finding high-return investments
At $56.44 per share, Federated Hermes trades at 11.6x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
