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The low valuation multiples for value stocks provide a margin of safety that growth stocks rarely offer. However, the challenge lies in determining whether these cheap assets are genuinely undervalued or simply on sale due to their potentially deteriorating business models.

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

Lithia (LAD)

Forward P/E Ratio: 8.9x

With a strong presence in the Western US, Lithia Motors (NYSE:LAD) sells a wide range of vehicles, including new and used cars, trucks, SUVs, and luxury vehicles from various manufacturers.

Why Is LAD Not Exciting?

1. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations

2. Widely-available products (and therefore stiff competition) result in an inferior gross margin of 15.9% that must be offset through higher volumes

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

At $315.88 per share, Lithia trades at 8.9x forward P/E. If you’re considering LAD for your portfolio, see our FREE research report to learn more.

Charter (CHTR)

Forward P/E Ratio: 10.6x

Operating as Spectrum, Charter (NASDAQ:CHTR) is a leading telecommunications company offering cable television, high-speed internet, and voice services across the United States.

Why Does CHTR Worry Us?

1. Number of internet subscribers has disappointed over the past two years, indicating weak demand for its offerings

2. Demand will likely be weak over the next 12 months as Wall Street expects flat revenue

3. Underwhelming 9.6% return on capital reflects management’s difficulties in finding profitable growth opportunities

Charter’s stock price of $411.13 implies a valuation ratio of 10.6x forward P/E. Dive into our free research report to see why there are better opportunities than CHTR.

La-Z-Boy (LZB)

Forward P/E Ratio: 12.9x

The prized possession of every mancave, La-Z-Boy (NYSE:LZB) is a furniture company specializing in recliners, sofas, and seats.

Why Is LZB Risky?

1. Products and services have few die-hard fans as sales have declined by 8% annually over the last two years

2. Projected sales growth of 1.8% for the next 12 months suggests sluggish demand

3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability