The following companies can be considered "falling knives" because their share prices have declined more than 59% over the past 52 weeks through May 30. Some investors are interested in these stocks because they are expected to top the overall market with impressive margins.
Wall Street is also optimistic about them as it issued recommendation ratings ranging from overweight to buy with average target prices that produce at least 135% stock appreciation within 52 weeks.
Investors are also aware that such share price depreciation can be a sign of financial distress, which will cause a major loss if it goes bankrupt. Investors can substantially reduce the risk of entering an unsuccessful investment if they consider only those falling knives with a moderate to low debt-to-equity ratio and a market cap above $50 million.
Stocks that meet these criteria include PolarityTE Inc. (PTE, Financial), Energous Corp. (WATT, Financial) and Surface Oncology Inc. (SURF, Financial).
Shares of PolarityTE closed at $6.10 on Thursday for a market capitalization of $153.15 million. The stock declined 76% over the last 52 weeks through May 30.
The biotechnology company has a debt-to-equity ratio of 2% versus the industry median of 28%. GuruFocus assigned a financial strength rating of 5 out of 10 and a profitability and growth rating of 4 out of 10.
The closing share price on Thursday was well below the 200-, 100- and 50-day simple moving average lines. The 52-week range was $5.98 to $41.22.
The price-book ratio is 2.34 versus the industry median of 4.1 and the price-sales ratio is 42.97.
The 14-day relative strength index of 24 suggests the stock is oversold.
Wall Street issued an overweight recommendation rating with an average target price of $30.67, reflecting 403% upside from Thursday 's closing price.
Energous closed at $4.4 per share on Thursday for a market capitalization of $136.90 million. The stock tumbled 76% over the past year through May 30.
The electronic components company has no debt. GuruFocus assigned a financial strength rating of 10 out of 10 and a profitability and growth rating of 3 out of 10.
Thursday's closing share price was below the 200-, 100- and 50-day simple moving average lines. The 52-week range was $4.02 to $18.7.
The price-book ratio is 3.62 versus an industry median of 1.47 and the price-sales ratio is 211.43 compared to the industry median of 0.98.
The 14-day relative strength index of 38 suggests the stock is neither overbought nor oversold.
Wall Street issued a buy recommendation rating with an average target price of $10.73, which reflects 135.8% upside from the closing price on Thursday.
Shares of Surface Oncology closed at $3.7 on Thursday for a market capitalization of $103.04 million. The stock has fallen 73% over the past year through May 30.
The biotechnology company has no debt. GuruFocus assigned a financial strength rating of 8 out of 10 and a profitability and growth rating of 2 out of 10.
The chart below shows the stock was trading below the 200-, 100- and 50-day simple moving average lines. The 52-week range was $3.45 to $18.18.
The price-book ratio is 0.96 versus the industry median of 4.1 and the price-sales ratio is 3.52.
The 14-day relative strength index of 34 suggests the stock has yet reached oversold levels.
Wall Street issued an overweight recommendation rating with an average target price of $10, which reflects 170.3% growth from the closing price on Thursday.
Disclosure: I have no positions in any securities mentioned.
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