Rock-bottom prices don't always mean rock-bottom businesses. The stocks we're examining today have all touched their 52-week lows, creating a classic investor's dilemma: bargain opportunity or value trap?
At StockStory, we dig beneath the surface of price movements to uncover whether a company's fundamentals justify its current valuation or suggest hidden potential. That said, here are three stocks where the skepticism is well-placed and some better opportunities to consider.
Microchip Technology (MCHP)
One-Month Return: -29.6%
Spun out from General Instrument in 1987, Microchip Technology (NASDAQ: MCHP) is a leading provider of microcontrollers and integrated circuits used mainly in the automotive world, especially in electric vehicles and their charging devices.
Why Are We Out on MCHP?
- Sales tumbled by 2.1% annually over the last five years, showing market trends are working against its favor during this cycle
- Sales are projected to tank by 9% over the next 12 months as its demand continues evaporating
- Free cash flow margin dropped by 13.4 percentage points over the last five years, implying the company became more capital intensive as competition picked up
At $38.90 per share, Microchip Technology trades at 21x forward price-to-earnings. Read our free research report to see why you should think twice about including MCHP in your portfolio.
Floor And Decor (FND)
One-Month Return: -15.5%
Operating large, warehouse-style stores, Floor & Decor (NYSE:FND) is a specialty retailer that specializes in hard flooring surfaces for the home such as tiles, hardwood, stone, and laminates.
Why Are We Hesitant About FND?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Revenue base of $4.46 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Low returns on capital reflect management’s struggle to allocate funds effectively, and its falling returns suggest its earlier profit pools are drying up
Floor And Decor’s stock price of $72.54 implies a valuation ratio of 36.4x forward price-to-earnings. If you’re considering FND for your portfolio, see our FREE research report to learn more.
Standex (SXI)
One-Month Return: -18.8%
Holding over 500 patents globally, Standex (NYSE:SXI) is a manufacturer and distributor of industrial components for various sectors.
Why Are We Wary of SXI?
- Sales tumbled by 1.7% annually over the last two years, showing market trends are working against its favor during this cycle
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 5.4% annually
Standex is trading at $141.46 per share, or 16.7x forward price-to-earnings. To fully understand why you should be careful with SXI, check out our full research report (it’s free).
Stocks We Like More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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 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 Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.