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.

This distinction between true value and value traps can challenge even the most skilled investors. Luckily for you, we started StockStory to help you uncover exceptional companies. That said, here are three value stocks climbing an uphill battle and some other investments you should look into instead.

J. M. Smucker (SJM)

Forward P/E Ratio: 10.9x

Best known for its fruit jams and spreads, J.M Smucker (NYSE: SJM) is a packaged foods company whose products span from peanut butter and coffee to pet food.

Why Should You Dump SJM?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Costs have risen faster than its revenue over the last year, causing its operating margin to decline by 27.1 percentage points
3. Low returns on capital reflect management’s struggle to allocate funds effectively, and its decreasing returns suggest its historical profit centers are aging

At $103.14 per share, J. M. Smucker trades at 10.9x forward P/E. Read our free research report to see why you should think twice about including SJM in your portfolio.

KB Home (KBH)

Forward P/E Ratio: 10.6x

The first homebuilder to be listed on the NYSE, KB Home (NYSE: KB) is a homebuilding company targeting the first-time home buyer and move-up buyer markets.

Why Do We Avoid KBH?

1. Product roadmap and go-to-market strategy need to be reconsidered as its backlog has averaged 20.4% declines over the past two years
2. Eroding returns on capital suggest its historical profit centers are aging
3. High net-debt-to-EBITDA ratio of 5× increases the risk of forced asset sales or dilutive financing if operational performance weakens

KB Home’s stock price of $61.62 implies a valuation ratio of 10.6x forward P/E. Check out our free in-depth research report to learn more about why KBH doesn’t pass our bar.

Delta (DAL)

Forward P/E Ratio: 9x

One of the ‘Big Four’ airlines in the US, Delta Air Lines (NYSE: DAL) is a major global air carrier that serves both business and leisure travelers through its domestic and international flights.

Why Do We Think Twice About DAL?

1. Performance surrounding its revenue passenger miles has lagged its peers
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 3.9%
3. Low free cash flow margin of 3.6% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders

Delta is trading at $61.35 per share, or 9x forward P/E. If you’re considering DAL for your portfolio, see our FREE research report to learn more.

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