Falling Knives are companies whose share prices have fallen more than 59% over the past year, generating the interest of investors as they can make huge gains if they rebound.
Investors are also aware that a sharp decline in the share price could signal financial distress, so their portfolio could be hurt if the company goes bankrupt.
Investors can, however, significantly reduce the risk of loss if they select falling knives with moderate-to-low debt-equity ratios.
In addition to the moderate-to-low financial burden, the following securities have received positive recommendation ratings ranging between overweight and buy from sell-side analysts on Wall Street, increasing the likelihood that they will recover.
Here are some results from my search.
Shares of Birchcliff Energy Ltd. (BIREF, Financial) closed at $1.33 on Friday for a market capitalization of $354.02 million. The stock declined 63.6% over the last 52 weeks through Aug. 30.
The stock of the Canadian intermediate oil and gas explorer and producer has a debt-to-equity ratio of 0.35 versus the industry median of 0.49.
Further, GuruFocus assigned a moderate financial strength rating of 4.5 out of 10 and a positive profitability and growth rating of 6 out of 10.
The stock is trading below the 200-, 100- and 50-day simple moving average lines. The 52-week range is $1.29 to $4.23.
The price-book ratio is 0.27 versus the industry median of 0.9 and the enterprise value-Ebitda ratio is 3.38 versus the industry median of 4.88.
The 14-day relative strength index of 31 suggests the stock is near oversold levels.
Analysts issued a buy recommendation rating with an average target price of $4.70.
Shares of Verso Corp. (VRS, Financial) closed at $10.21 per share on Friday for a market capitalization of $354.20 million. The stock declined 67.5% over the past 52 weeks through Aug. 30.
The Miamisburg, Ohio-based producer and seller of coated papers in North America has a debt-equity ratio of 0.06 versus the industry median of 0.55.
GuruFocus assigned a positive financial strength rating of 6.1 out of 10 and a moderate profitability and growth rating of 4 out of 10.
The share price is below the 200-, 100- and 50-day simple moving average lines. The 52-week range was $9.61 to $34.60.
The price-book ratio is 0.42 versus the industry median of 0.93 and the price sales ratio is 0.14 versus the industry median of 0.58.
The 14-day relative strength index of 23 suggests the stock is oversold.
Analysts issued an overweight recommendation rating with an average target price of $33. The overweight rating means that the security is foreseen to outperform either the industry or the entire market within 12 months.
Disclosure: I have no positions in any securities mentioned.
