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.
Identifying genuine bargains from value traps is something many investors struggle with, which is why we started StockStory - to help you find the best companies. That said, here are two value stocks trading at big discounts to their intrinsic values and one facing an uphill battle.
One Value Stock to Sell:
ScanSource (SCSC)
Forward P/E Ratio: 11.7x
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 Are We Wary of SCSC?
- Flat sales over the last two years suggest it must find different ways to grow during this cycle
- Poor free cash flow margin of 2.9% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- ROIC of 8.4% reflects management’s challenges in identifying attractive investment opportunities
At $57.65 per share, ScanSource trades at 11.7x forward P/E. If you’re considering SCSC for your portfolio, see our FREE research report to learn more.
Two Value Stocks to Buy:
Federated Hermes (FHI)
Forward P/E Ratio: 9.9x
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 Will FHI Beat the Market?
- 10.2% annual revenue growth over the last two years was better than the sector average, highlighting the value of its products and services
- Performance over the past two years was boosted by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Market-beating return on equity illustrates that management has a knack for investing in profitable ventures
Federated Hermes is trading at $56.08 per share, or 9.9x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
NerdWallet (NRDS)
Forward P/E Ratio: 5.9x
Born from founder Tim Chen's frustration with the lack of transparent credit card information when helping his sister in 2009, NerdWallet (NASDAQ:NRDS) is a digital platform that provides financial guidance to help consumers and small businesses make smarter decisions about credit cards, loans, insurance, and other financial products.
Why Are We Bullish on NRDS?
- Impressive 24.3% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 195% exceeded its revenue gains over the last two years
NerdWallet’s stock price of $9.19 implies a valuation ratio of 5.9x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
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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-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.