Falling knives are companies whose share prices have declined more than 59% over the last 52 weeks. There are investors who hold shares of these securities because they expect that they will rebound enough to generate large returns.
The share price tumble, however, could be the beginning of financial issues, which may hurt the portfolio of an investor severely if the business fails.
Thus, investors must be cautious when considering these risky investments. Falling knives with a moderate to low debt-equity ratio should run a lower risk of loss.
In addition to having a moderate to low financial burden, the following stocks have received positive recommendation ratings from Wall Street sell-side analysts.
CymaBay Therapeutics
Shares of CymaBay Therapeutics Inc (CBAY, Financial) closed at $1.96 on Monday for a market capitalization of $134.65 million. The stock declined 75% in the past 12 months through Dec. 30.
The Newark, California-based a clinical-stage biopharmaceutical developer of therapies for liver diseases and other chronic illnesses has a debt-equity ratio of 0.01, which is better than the industry median of 0.11. However, a Piotroski F-Score of 2 indicates that the operation of the business is currently producing poor results.
The closing price on Monday was below the 200-, 100- and 50-day simple moving average lines. The 52-week range is $1.29 to $14.00.
The price-book ratio is 0.63 compared to the industry median of 3.63.
The 14-day relative strength index of 37 implies the stock isn’t far from oversold levels.
Wall Street sell-side analysts recommend to hold this stock and have set an average target share price of $2.31.
Natural Health Trends
Shares of Natural Health Trends Corp. (NHTC, Financial) closed at $5.32 per share on Monday for a market capitalization of $61.29 million. The stock declined 71% in the past year through Dec. 30.
The Hong Kong-based provider of personal care and wellness products has a debt-equity ratio of 0.04 versus the industry median of 0.6.
GuruFocus assigned a positive rating of 6 out of 10 for both the company's financial strength and for its profitability.
The closing price on Monday was below the 200-, 100- and 50-day simple moving average lines. The 52-week range was $5.06 to $19.88.
The price-book ratio is 0.74 versus the industry median of 1.37, while the price-sales ratio is 0.59 versus the industry median of 0.58 and the price-earnings ratio is 22.17 compared to the industry median of 17.5.
The 14-day relative strength index of 37 suggests the stock is near oversold levels.
Wall Street sell-side analysts issued a buy recommendation rating for this stock.
Disclosure: I have no positions in any securities mentioned.
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