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. Keeping that in mind, here is one value stock trading at a big discount to its intrinsic value and two with little support.

Two Value Stocks to Sell:

Cars.com (CARS)

Forward EV/EBITDA Ratio: 3.7x

Originally started as a joint venture between several media companies including The Washington Post and The New York Times, Cars.com (NYSE:CARS) is a digital marketplace that connects new and used car buyers and sellers.

Why Is CARS Not Exciting?

1. Likely needs to improve its platform or increase its marketing budget for penetration to accelerate as its dealer customers were flat over the last two years
2. Estimated sales growth of 3.3% for the next 12 months implies demand will slow from its three-year trend
3. Incremental sales over the last three years were less profitable as its earnings per share were flat while its revenue grew

Cars.com is trading at $12.20 per share, or 3.7x forward EV-to-EBITDA. To fully understand why you should be careful with CARS, check out our full research report (it’s free).

Gilead Sciences (GILD)

Forward P/E Ratio: 15x

Best-known for its HIV and Hepatitis treatments, Gilead Sciences (NASDAQ:GILD) is a biopharmaceutical company that discovers, develops, and commercializes innovative medicines.

Why Are We Cautious About GILD?

1. Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 2.7% for the last two years
2. Expenses have increased as a percentage of revenue over the last two years as its adjusted operating margin fell by 15 percentage points
3. Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term

At $117.90 per share, Gilead Sciences trades at 15x forward price-to-earnings. Read our free research report to see why you should think twice about including GILD in your portfolio, it’s free.

One Value Stock to Watch:

Granite Construction (GVA)

Forward P/E Ratio: 13.6x

Having played a role in the construction of the Hoover Dam, Granite Construction (NYSE:GVA) is a provider of infrastructure solutions for roads, bridges, and other projects.

Why Are We Fans of GVA?

1. Operating margin expanded by 10.1 percentage points over the last five years as it scaled and became more efficient
2. Incremental sales over the last two years have been highly profitable as its earnings per share increased by 43.3% annually, topping its revenue gains
3. Improving returns on capital suggest its past investments are beginning to deliver value

Granite Construction’s stock price of $73.83 implies a valuation ratio of 13.6x forward price-to-earnings. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.

Stocks We Like Even More

The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market - and we’re zeroing in on the stocks that could benefit immensely.

Take advantage of the rebound by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

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 Axon (+711% five-year return). Find your next big winner with StockStory today for free.