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.

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. Keeping that in mind, here are three value stocks with poor fundamentals and some alternatives you should consider instead.

G-III (GIII)

Forward P/E Ratio: 6.2x

Founded as a small leather goods business, G-III (NASDAQ:GIII) is a fashion and apparel conglomerate with a diverse portfolio of brands.

Why Do We Avoid GIII?

1. Flat sales over the last two years suggest it must innovate and find new ways to grow

2. Sales are projected to tank by 2.4% over the next 12 months as demand evaporates further

3. ROIC of 7.8% reflects management’s challenges in identifying attractive investment opportunities

G-III is trading at $24.85 per share, or 6.2x forward price-to-earnings. Check out our free in-depth research report to learn more about why GIII doesn’t pass our bar .

Bristol-Myers Squibb (BMY)

Forward P/E Ratio: 7.3x

With roots dating back to 1887 and a transformative merger in 1989 that gave the company its current name, Bristol-Myers Squibb (NYSE:BMY) discovers, develops, and markets prescription medications for serious diseases including cancer, blood disorders, immunological conditions, and cardiovascular diseases.

Why Does BMY Give Us Pause?

1. Annual sales growth of 2.3% over the last two years lagged behind its healthcare peers as its large revenue base made it difficult to generate incremental demand

2. Costs have risen faster than its revenue over the last five years, causing its adjusted operating margin to decline by 30.2 percentage points

3. Earnings per share fell by 24.7% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable

Bristol-Myers Squibb’s stock price of $50.60 implies a valuation ratio of 7.3x forward price-to-earnings. Read our free research report to see why you should think twice about including BMY in your portfolio, it’s free .

Elanco (ELAN)

Forward P/E Ratio: 9.9x

Originally established as a division of pharmaceutical giant Eli Lilly before becoming independent in 2018, Elanco Animal Health (NYSE:ELAN) develops and sells medications, vaccines, and other health products for pets and farm animals across more than 90 countries.