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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.

PubMatic (PUBM)

Forward P/S Ratio: 1.9x

Founded in 2006 as an online ad platform helping ad sellers, Pubmatic (NASDAQ: PUBM) is a fully integrated cloud-based programmatic advertising platform.

Why Do We Steer Clear of PUBM?

1. Annual revenue growth of 6.6% over the last three years was well below our standards for the software sector

2. Estimated sales growth of 4.3% for the next 12 months implies demand will slow from its three-year trend

3. Gross margin of 64.9% is below its competitors, leaving less money to invest in areas like marketing and R&D

PubMatic’s stock price of $11.60 implies a valuation ratio of 1.9x forward price-to-sales. If you’re considering PUBM for your portfolio, see our FREE research report to learn more.

Brunswick (BC)

Forward P/E Ratio: 11.9x

Formerly known as Brunswick-Balke-Collender Company, Brunswick (NYSE: BC) is a designer and manufacturer of recreational marine products, including boats, engines, and marine parts.

Why Are We Out on BC?

1. Annual sales declines of 13.8% for the past two years show its products and services struggled to connect with the market

2. Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 2.8 percentage points

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

Brunswick is trading at $52.16 per share, or 11.9x forward P/E. Read our free research report to see why you should think twice about including BC in your portfolio, it’s free.

Hillenbrand (HI)

Forward P/E Ratio: 8.8x

Hillenbrand, Inc. (NYSE: HI) is an industrial company that designs, manufactures, and sells highly engineered processing equipment and solutions for various industries.

Why Is HI Risky?

1. 7.2% annual revenue growth over the last five years was slower than its industrials peers

2. Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 5.9% annually

3. Free cash flow margin dropped by 14.7 percentage points over the last five years, implying the company became more capital intensive as competition picked up