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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 are three value stocks climbing an uphill battle and some other investments you should look into instead.

Denny's (DENN)

Forward P/E Ratio: 7.7x

Open around the clock, Denny’s (NASDAQ:DENN) is a chain of diner restaurants serving breakfast and traditional American fare.

Why Are We Out on DENN?

1. Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand

2. Capital intensity has ramped up over the last year as its free cash flow margin decreased by 9 percentage points

3. 5× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

At $4 per share, Denny's trades at 7.7x forward P/E. Check out our free in-depth research report to learn more about why DENN doesn’t pass our bar.

Accel Entertainment (ACEL)

Forward P/E Ratio: 12.4x

Established in Illinois, Accel Entertainment (NYSE:ACEL) is a provider of electronic gaming machines and interactive amusement terminals to bars and entertainment venues.

Why Are We Cautious About ACEL?

1. Demand for its offerings was relatively low as its number of video gaming terminals sold has underwhelmed

2. Estimated sales growth of 6.5% for the next 12 months implies demand will slow from its two-year trend

3. Low free cash flow margin of 4.4% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders

Accel Entertainment is trading at $11.46 per share, or 12.4x forward P/E. To fully understand why you should be careful with ACEL, check out our full research report (it’s free).

Walgreens (WBA)

Forward P/E Ratio: 7.4x

Primarily offering prescription medicine, health, and beauty products, Walgreens Boots Alliance (NASDAQ:WBA) is a pharmacy chain formed through the 2014 major merger of American company Walgreens and European company Alliance Boots.

Why Does WBA Worry Us?

1. Sizable revenue base leads to growth challenges as its 2.9% annual revenue increases over the last six years fell short of other consumer retail companies

2. Commoditized inventory, bad unit economics, and high competition are reflected in its low gross margin of 18%

3. 7× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly