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.

Separating the winners from the value traps is a tough challenge, and that’s where StockStory comes in. Our job is to find you high-quality companies that will stand the test of time. Keeping that in mind, here is one value stock with strong fundamentals and two best left ignored.

Two Value Stocks to Sell:

RE/MAX (RMAX)

Forward P/E Ratio: 8.2x

Short for Real Estate Maximums, RE/MAX (NYSE: RMAX) operates a real estate franchise network spanning over 100 countries and territories.

Why Do We Steer Clear of RMAX?

1. Sluggish trends in its agents suggest customers aren’t adopting its solutions as quickly as the company hoped
2. Incremental sales over the last five years were much less profitable as its earnings per share fell by 7.1% annually while its revenue grew
3. Projected 5.5 percentage point decline in its free cash flow margin next year reflects the company’s plans to increase its investments to defend its market position

RE/MAX’s stock price of $10.72 implies a valuation ratio of 8.2x forward P/E. Dive into our free research report to see why there are better opportunities than RMAX.

DHT Holdings (DHT)

Forward P/E Ratio: 7.3x

With each vessel capable of carrying roughly 2 million barrels of oil—enough to fill about 125 Olympic swimming pools—DHT Holdings (NYSE: DHT) operates very large crude carriers that transport crude oil across international routes for energy companies and traders.

Why Are We Hesitant About DHT?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 7.6% annually over the last five years
2. Modest revenue base of $370.3 million gives it less fixed cost leverage and fewer distribution channels than larger companies
3. High extraction costs and unfavorable asset economics are reflected in its low gross margin of 30.9%

DHT Holdings is trading at $18.53 per share, or 7.3x forward P/E. Check out our free in-depth research report to learn more about why DHT doesn’t pass our bar.

One Value Stock to Buy:

Lyft (LYFT)

Forward EV/EBITDA Ratio: 7.7x

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 Will LYFT Outperform?

1. Has the opportunity to boost monetization through new features and premium offerings as its active riders have grown by 12.2% annually over the last two years
2. Performance over the past three years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 64.1% outpaced its revenue gains
3. Free cash flow margin grew by 26.3 percentage points over the last few years, giving the company more chips to play with

At $14.19 per share, Lyft trades at 7.7x forward EV/EBITDA. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.

High-Quality Stocks for All Market Conditions

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