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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. Keeping that in mind, here are three value stocks climbing an uphill battle and some other investments you should look into instead.

IAC (IAC)

Forward P/E Ratio: 16x

Originally known as InterActiveCorp and built through Barry Diller's strategic acquisitions since the 1990s, IAC (NASDAQ:IAC) operates a portfolio of category-leading digital businesses including Dotdash Meredith, Angi, and Care.com, focusing on digital publishing, home services, and caregiving platforms.

Why Are We Hesitant About IAC?

1. Annual sales declines of 14.1% for the past two years show its products and services struggled to connect with the market during this cycle

2. Earnings per share have dipped by 71.6% annually over the past five years, which is concerning because stock prices follow EPS over the long term

3. Push for growth has led to negative returns on capital, signaling value destruction

IAC is trading at $35.16 per share, or 16x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than IAC.

Cable One (CABO)

Forward P/E Ratio: 6.2x

Founded in 1986, Cable One (NYSE:CABO) provides high-speed internet, cable television, and telephone services, primarily in smaller markets across the United States.

Why Should You Dump CABO?

1. Number of residential data subscribers has disappointed over the past two years, indicating weak demand for its offerings

2. Sales are projected to tank by 2.7% over the next 12 months as its demand continues evaporating

3. Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 4 percentage points

At $269.88 per share, Cable One trades at 6.2x forward price-to-earnings. Check out our free in-depth research report to learn more about why CABO doesn’t pass our bar.

NVR (NVR)

Forward P/E Ratio: 14.6x

Known for its unique land acquisition strategy, NVR (NYSE:NVR) is a respected homebuilder and mortgage company in the United States.

Why Are We Wary of NVR?

1. Backlog growth averaged a weak 1.5% over the past two years, suggesting it may need to tweak its product roadmap or go-to-market strategy

2. Estimated sales decline of 8.2% for the next 12 months implies a challenging demand environment

3. Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 1.1% annually