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.
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 is one value stock trading at a big discount to its intrinsic value and two best left ignored.
Forward P/E Ratio: 13.8x
A trailblazer in the avocado industry, Calavo Growers (NASDAQ:CVGW) is a pioneering California-based provider of high-quality avocados and other fresh food products.
Why Does CVGW Fall Short?
Products have few die-hard fans as sales have declined by 14.7% annually over the last three years
Subscale operations are evident in its revenue base of $688.3 million, meaning it has fewer distribution channels than its larger rivals
Gross margin of 10.6% is an output of its commoditized products
At $23.58 per share, Calavo trades at 13.8x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than CVGW.
Forward P/E Ratio: 13.3x
With over 2,600 dialysis centers across the United States and a presence in 13 countries, DaVita (NYSE:DVA) operates a network of dialysis centers providing treatment and care for patients with chronic kidney disease and end-stage kidney disease.
Why Does DVA Worry Us?
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 2.4% for the last five years
Flat treatments over the past two years indicate demand is soft and that the company may need to revise its strategy
Anticipated sales growth of 5% for the next year implies demand will be shaky
DaVita is trading at $149 per share, or 13.3x forward price-to-earnings. Read our free research report to see why you should think twice about including DVA in your portfolio, it’s free.
Forward EV/EBITDA Ratio: 9.2x
Founded by Logan Green and John Zimmer as a long-distance intercity carpooling company Zimride, Lyft (NASDAQ: LYFT) operates a ridesharing network in the US and Canada.
Why Could LYFT Be a Winner?
Active Riders have increased by an average of 10% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features
Performance over the past three years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 42.5% outpaced its revenue gains
Free cash flow margin grew by 18.9 percentage points over the last few years, giving the company more chips to play with
Story Continues
