Value investing has created more billionaires than any other strategy, like Warren Buffett, who built his fortune by purchasing wonderful businesses at reasonable prices. But these hidden gems are few and far between - many stocks that appear cheap often stay that way because they face structural issues.

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.

Western Digital (WDC)

Forward P/E Ratio: 10.7x

Founded in 1970 by a Motorola employee, Western Digital (NASDAQ: WDC) is a leading producer of hard disk drives, SSDs and flash memory.

Why Is WDC Risky?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 11.1% annually over the last five years

2. Negative 21.4% gross margin means it loses money on every sale and must pivot or scale quickly to survive

3. Responsiveness to unforeseen market trends is restricted due to its substandard operating margin profitability

At $51.44 per share, Western Digital trades at 10.7x forward P/E. If you’re considering WDC for your portfolio, see our FREE research report to learn more.

American Eagle (AEO)

Forward P/E Ratio: 8.8x

With a heavy focus on denim, American Eagle Outfitters (NYSE:AEO) is a specialty retailer offering an assortment of apparel and accessories to young adults.

Why Does AEO Worry Us?

1. Sales trends were unexciting over the last six years as its 4.3% annual growth was below the typical consumer retail company

2. Projected sales decline of 2% for the next 12 months points to a tough demand environment ahead

3. Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its shrinking returns suggest its past profit sources are losing steam

American Eagle’s stock price of $10.98 implies a valuation ratio of 8.8x forward P/E. Dive into our free research report to see why there are better opportunities than AEO.

United Parcel Service (UPS)

Forward P/E Ratio: 12.7x

Trademarking its recognizable UPS Brown color, UPS (NYSE:UPS) offers package delivery, supply chain management, and freight forwarding services.

Why Do We Think UPS Will Underperform?

1. Declining unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy

2. Performance over the past two years shows each sale was less profitable as its earnings per share dropped by 19.8% annually, worse than its revenue

3. Eroding returns on capital suggest its historical profit centers are aging