Value investing has produced some of the world’s most famous investing billionaires, including Warren Buffett, David Einhorn, and Seth Klarman, who built their fortunes 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.
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 with poor fundamentals and some alternatives you should consider instead.
Udemy (UDMY)
Forward EV/EBITDA Ratio: 4.2x
With courses ranging from investing to cooking to computer programming, Udemy (NASDAQ: UDMY) is an online learning platform that connects learners with expert instructors who specialize in a wide range of topics.
Why Does UDMY Worry Us?
- Preference for prioritizing user growth over monetization has led to 1.7% annual drops in its average revenue per buyer
- Demand is forecasted to shrink as its estimated sales for the next 12 months are flat
- High marketing expenses suggest it needs to spend heavily on new customer acquisition to sustain momentum
Udemy’s stock price of $4.85 implies a valuation ratio of 4.2x forward EV/EBITDA. If you’re considering UDMY for your portfolio, see our FREE research report to learn more.
Sealed Air (SEE)
Forward P/E Ratio: 13x
Founded in 1960, Sealed Air Corporation (NYSE: SEE) specializes in the development and production of protective and food packaging solutions, serving a variety of industries.
Why Do We Steer Clear of SEE?
- Flat unit sales over the past two years suggest it might have to lower prices to accelerate growth
- Demand will likely be weak over the next 12 months as Wall Street expects flat revenue
- Eroding returns on capital suggest its historical profit centers are aging
Sealed Air is trading at $41.87 per share, or 13x forward P/E. Read our free research report to see why you should think twice about including SEE in your portfolio.
LendingTree (TREE)
Forward EV/EBITDA Ratio: 8.2x
Using the same comparison model that revolutionized travel booking, LendingTree (NASDAQ: TREE) operates an online platform that connects consumers with financial service providers across mortgages, personal loans, credit cards, insurance, and other financial products.
Why Are We Out on TREE?
- Flat sales over the last three years suggest it must innovate and find new ways to grow
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 8.5%
- Excessive marketing spend signals little organic demand and traction for its platform
At $58.23 per share, LendingTree trades at 8.2x forward EV/EBITDA. Check out our free in-depth research report to learn more about why TREE doesn’t pass our bar.
Stocks We Like More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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 Kadant (+351% five-year return). Find your next big winner with StockStory today.
