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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. That said, here are three value stocks with little support and some other investments you should consider instead.

Teladoc (TDOC)

Forward EV/EBITDA Ratio: 4.3x

Founded to help people in rural areas get online medical consultations, Teladoc Health (NYSE:TDOC) is a telemedicine platform that facilitates remote doctor’s visits.

Why Are We Hesitant About TDOC?

1. Sales trends were unexciting over the last three years as its 6% annual growth was below the typical consumer internet company

2. Focus on expanding its platform came at the expense of monetization as its average revenue per user fell by 5.3% annually

3. Forecasted revenue decline of 1.3% for the upcoming 12 months implies demand will fall off a cliff

At $7.35 per share, Teladoc trades at 4.3x forward EV/EBITDA. Check out our free in-depth research report to learn more about why TDOC doesn’t pass our bar.

Sally Beauty (SBH)

Forward P/E Ratio: 4.7x

Catering to both everyday consumers as well as salon professionals, Sally Beauty (NYSE:SBH) is a retailer that sells salon-quality beauty products such as makeup and haircare products.

Why Do We Avoid SBH?

1. Store closures and poor same-store sales reveal weak demand and a push toward operational efficiency

2. Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience

3. Modest revenue base of $3.70 billion gives it less fixed cost leverage and fewer distribution channels than larger companies

Sally Beauty’s stock price of $8.90 implies a valuation ratio of 4.7x forward P/E. If you’re considering SBH for your portfolio, see our FREE research report to learn more.

Guess (GES)

Forward P/E Ratio: 5.8x

Flexing the iconic upside-down triangle logo with a question mark, Guess (NYSE:GES) is a global fashion brand known for its trendy clothing, accessories, and denim wear.

Why Do We Steer Clear of GES?

1. Annual revenue growth of 2.3% over the last five years was below our standards for the consumer discretionary sector

2. Estimated sales growth of 3.6% for the next 12 months implies demand will slow from its two-year trend

3. High net-debt-to-EBITDA ratio of 5× could force the company to raise capital at unfavorable terms if market conditions deteriorate