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, and a low valuation can reflect underlying business challenges rather than a genuine bargain.

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 are three value stocks with poor fundamentals and some alternatives you should consider instead.

Kohl's (KSS)

Forward P/E Ratio: 13.6x

Founded as a corner grocery store in Milwaukee, Wisconsin, Kohl’s (NYSE: KSS) is a department store chain that sells clothing, cosmetics, electronics, and home goods.

Why Is KSS Risky?

1. Absence of new stores indicates weak demand as management focuses on improving existing location performance
2. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
3. Subpar operating margin of 3.7% constrains its ability to invest in process improvements or effectively respond to new competitive threats

At $21.14 per share, Kohl's trades at 13.6x forward P/E. Dive into our free research report to see why there are better opportunities than KSS.

D.R. Horton (DHI)

Forward P/E Ratio: 12.4x

One of the largest homebuilding companies in the U.S., D.R. Horton (NYSE: DHI) builds a variety of new construction homes across multiple markets.

Why Should You Sell DHI?

1. Product roadmap and go-to-market strategy need to be reconsidered as its backlog has averaged 3.6% declines over the past two years
2. Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
3. Waning returns on capital imply its previous profit engines are losing steam

D.R. Horton’s stock price of $134.33 implies a valuation ratio of 12.4x forward P/E. Read our free research report to see why you should think twice about including DHI in your portfolio.

CDW (CDW)

Forward P/E Ratio: 12.5x

Serving as a crucial bridge between technology manufacturers and end users since 1984, CDW (NASDAQ: CDW) is a multi-brand provider of information technology solutions that helps businesses and public sector organizations select, implement, and manage hardware, software, and IT services.

Why Does CDW Give Us Pause?

1. The company has faced growth challenges as its 3.6% annual revenue increases over the last five years fell short of other business services companies
2. Estimated sales growth of 4% for the next 12 months implies demand will slow from its two-year trend
3. Annual earnings per share growth of 3.8% underperformed its revenue over the last two years, showing its incremental sales were less profitable

CDW is trading at $143.75 per share, or 12.5x forward P/E. To fully understand why you should be careful with CDW, check out our full research report (it’s free).

Stocks We Like 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.

But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.