The following biotechnology companies are falling knives since their share prices have declined more than 59% over the past year through April 4. Some investors buy these stocks because they believe they can outperform the overall market with wide margins.
Wall Street issued a buy recommendation rating for all three stocks, increasing the likelihood of them outperforming the S&P 500 Index over the next 52 weeks.
Further, these companies have a GuruFocus financial strength rating of at least 5 out of 10, reducing the bankruptcy rate risk, which is quite common among falling knives.
Here are the results of my search.
CytomX Therapeutics Inc. (CTMX, Financial) closed at $11.13 per share on Thursday following a 60% decline for the past year through April 4.
Thursday's closing price was below the 200, 100 and 50-day simple moving average lines. It is 18.7% off the 52-week low of $9.38 and 176.1% from the 52-week high of $30.73.
The biotech company's market capitalization is $502.09 million, the price-book ratio is 3.85 versus an industry median of 4.10 and the price-sales ratio is 7.64.
GuruFocus assigned a financial strength rating of 7 out of 10 and a profitability and growth rating of 5 out of 10.
Wall Street issued an average target price of $25.20, which reflects 127% upsid from the closing share price on Thursday.
The 14-day relative strength index of 44.64 suggests the stock is close to oversold levels.
Shares of Aclaris Therapeutics Inc. (ACRS, Financial) closed at $6.43 on Thursday for a market capitalization of roughly $265.4 million. The stock declined 61% over the last 52 weeks through April 4.
The pharmaceutical company's closing price on Thursday was well below the 200-day simple moving average line, slightly below the 100-day line and on par with the 50-day line. The 52-week range is $5.49 to $21.97.
The price-book ratio is 1.15 versus an industry median of 4.10 and the price-sales ratio is 21.21.
GuruFocus assigned a financial strength rating of 5 out of 10 and a profitability and growth rating of 3 out of 10.
Wall Street issued an average target price of $28.20, reflecting 346.2% upside from Thursday's closing price.
The 14-day relative strength index of 52.88 suggests the stock is neither oversold nor overbought.
Shares of Menlo Therapeutics Inc. (MNLO, Financial) closed at $7.88 on Thursday for a market capitalization of $183.27 million. The stock has fallen 78% over the past year through April 4.
The chart below shows the stock is still trading slightly above the 200, 100 and 50-day simple moving average lines. It is 111.2% above the 52-week low of $3.74 and 361.8% below the 52-week high of $36.48.
The price-book ratio is 1.37 versus an industry median of 1.62 and the price-sales ratio is 13.02.
GuruFocus assigned a financial strength rating of 8 out of 10 and a profitability and growth rating of 3 out of 10.
Wall Street issued an average target price of $19.8, which represents a 150.6% upside from the closing price on Thursday.
The 14-day relative strength index of 55.69 suggests the stock has not yet reached oversold levels.
Disclosure: I have no positions in any securities mentioned.
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