Value stocks typically trade at discounts to the broader market, offering patient investors the opportunity to buy businesses when they’re out of favor. The key risk, however, is that these stocks are usually cheap for a reason – five cents for a piece of fruit may seem like a great deal until you find out it’s rotten.
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 are two value stocks trading at big discounts to their intrinsic values and one with little support.
Forward P/E Ratio: 7.8x
Founded in 1929, Newmark (NASDAQ:NMRK) provides commercial real estate services, including leasing advisory, global corporate services, investment sales and capital markets, property and facilities management, valuation and advisory, and consulting.
Why Do We Avoid NMRK?
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11.6% annual revenue growth over the last five years was slower than its consumer discretionary peers
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Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 1.7% for the last two years
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Returns on capital are increasing as management makes relatively better investment decisions
Newmark is trading at $14.59 per share, or 7.8x forward P/E. Read our free research report to see why you should think twice about including NMRK in your portfolio, it’s free.
Forward P/E Ratio: 15.3x
Operating as a professional employer organization (PEO) that serves over 8,000 companies with more than 120,000 worksite employees, Barrett Business Services (NASDAQ:BBSI) provides management solutions that help small and mid-sized businesses handle human resources, payroll, workers’ compensation, and other administrative functions.
Why Do We Like BBSI?
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Solid 7.7% annual revenue growth over the last two years indicates its offering’s solve complex business issues
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Free cash flow margin grew by 6.1 percentage points over the last five years, giving the company more chips to play with
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Industry-leading 54.7% return on capital demonstrates management’s skill in finding high-return investments
At $28.15 per share, Barrett trades at 15.3x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Forward P/E Ratio: 7x
Tracing its roots back to 1945 and named after founder Bernard Gerald Cantor, BGC Group (NASDAQ:BGC) operates a global brokerage and financial technology platform that facilitates trading across fixed income, foreign exchange, equities, energy, and commodities markets.