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 offering a compelling risk-reward profile and two with little support.
Two Value Stocks to Sell:
Lincoln Financial Group (LNC)
Forward P/B Ratio: 0.6x
Founded in 1905 by a group of Fort Wayne, Indiana businessmen who named the company after Abraham Lincoln, Lincoln National Corporation (NYSE: LNC) provides insurance, retirement plans, and wealth management products through its subsidiaries, operating under four main segments: Annuities, Life Insurance, Group Protection, and Retirement Plan Services.
Why Are We Wary of LNC?
- Net premiums earned remained stagnant over the last five years, indicating expansion challenges this cycle
- Estimated sales growth of 2.6% for the next 12 months implies demand will slow from its two-year trend
- Book value per share tumbled by 14% annually over the last five years, showing insurance sector trends are working against it during this cycle
Lincoln Financial Group’s stock price of $34.74 implies a valuation ratio of 0.6x forward P/B. To fully understand why you should be careful with LNC, check out our full research report (it’s free).
PennyMac Financial Services (PFSI)
Forward P/B Ratio: 0.9x
Founded during the 2008 financial crisis to help address the mortgage market meltdown, PennyMac Financial Services (NYSE: PFSI) is a specialty financial services company that originates, services, and manages investments related to residential mortgage loans in the United States.
Why Do We Think Twice About PFSI?
- Sales tumbled by 12.1% annually over the last five years, showing market trends are working against it during this cycle
- 4% annual net interest income growth over the last five years was slower than its banking peers
- Sales were less profitable over the last five years as its earnings per share fell by 13.1% annually, worse than its revenue declines
PennyMac Financial Services is trading at $81.25 per share, or 0.9x forward P/B. If you’re considering PFSI for your portfolio, see our FREE research report to learn more.
One Value Stock to Watch:
Freshworks (FRSH)
Forward P/S Ratio: 2.7x
Starting as a customer service solution before expanding into a comprehensive software suite, Freshworks (NASDAQ: FRSH) provides AI-powered software-as-a-service solutions that help companies manage customer service, IT support, sales, and marketing functions.
Why Could FRSH Be a Winner?
- 25.8% annual revenue growth over the last five years surpassed the sector average as its software resonated with customers
- Prominent and differentiated software results in a top-tier gross margin of 85%
- FRSH is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
At $9.38 per share, Freshworks trades at 2.7x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
