McMurtry Investment Report & Model Portfolios

What is a Value Trap?

April 7, 2024

Looks cheap on a P/E, P/Book Value and on a EV/FWD EBITDA basis

Stock may have a high dividend yield

Company comes up as an attractive purchase on a stock screen due to cheap valuation


Free Cash Flow does not cover the dividend

Highly levered balance sheet

Highly competitive industry

Low valuation persists for a long period of time

Poor historical and projected growth in Revenues, Net Income, EPS, Operating Cash Flow and EBITDA


Do not invest in these type of companies.

Example – BCE



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