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. Keeping that in mind, here are three value stocks with poor fundamentals and some alternatives you should consider instead.

Conagra (CAG)

Forward P/E Ratio: 7.9x

Founded in 1919 as Nebraska Consolidated Mills in Omaha, Nebraska, Conagra Brands today (NYSE: CAG) boasts a diverse portfolio of packaged foods brands that includes everything from whipped cream to jarred pickles to frozen meals.

Why Is CAG Risky?

1. Falling unit sales over the past two years show it’s struggled to move its products and had to rely on price increases
2. Sales are projected to tank by 3.5% over the next 12 months as demand evaporates further
3. Low returns on capital reflect management’s struggle to allocate funds effectively, and its decreasing returns suggest its historical profit centers are aging

At $19.38 per share, Conagra trades at 7.9x forward P/E. To fully understand why you should be careful with CAG, check out our full research report (it’s free).

Utz (UTZ)

Forward P/E Ratio: 14.4x

Tracing its roots back to 1921 when Bill and Salie Utz began making potato chips in their kitchen, Utz Brands (NYSE: UTZ) offers salty snacks such as potato chips, tortilla chips, pretzels, cheese snacks, and ready-to-eat popcorn, among others.

Why Should You Sell UTZ?

1. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
2. Smaller revenue base of $1.43 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
3. ROIC of 0.3% reflects management’s challenges in identifying attractive investment opportunities

Utz’s stock price of $12.91 implies a valuation ratio of 14.4x forward P/E. Check out our free in-depth research report to learn more about why UTZ doesn’t pass our bar.

Dentsply Sirona (XRAY)

Forward P/E Ratio: 7x

With roots dating back to 1877 when it introduced the first dental electric drill, Dentsply Sirona (NASDAQ: XRAY) manufactures and sells professional dental equipment, technologies, and consumable products used by dentists and specialists worldwide.

Why Should You Dump XRAY?

1. Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
2. Negative returns on capital show that some of its growth strategies have backfired, and its falling returns suggest its earlier profit pools are drying up
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

Dentsply Sirona is trading at $13.96 per share, or 7x forward P/E. If you’re considering XRAY for your portfolio, see our FREE research report to learn more.

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