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Alberto Abaterusso
Alberto Abaterusso
Articles (1863) 

Analysts Suggest Picking Up These 2 Falling Knives

Their moderate to low financial burden reduces the investment risk

January 16, 2020 | About:

Wall Street analysts recommend increasing holdings in EQT Corporation (NYSE:EQT) and ObsEva SA (NASDAQ:OBSV), even though their share prices have dropped more than 59% in the past year through Jan. 15, making them into falling knives.

Investors who are interested in this category of stocks are aware that these holdings carry a substantial risk of loss because the quick worsening in the share price usually signals the threat of financial problems hanging over the company. Investors can, however, reduce such risk if they choose falling knives with a moderate to low financial burden, represented by a debt-equity ratio below 0.50.

Together with a moderate to low financial burden, these falling knives have positive Wall Street sell-side analyst recommendation ratings.

EQT

Shares of EQT Corporation closed at a price of $8.46 per unit on Jan. 15 for a market cap of $2.16 billion. The stock price declined 60% over the past 52 weeks through Jan. 15. Wall Street analysts recommend a moderate buy rating with an average target price of $14.00, reflecting a 65% upside.

The closing price on Wednesday was below the 200-, 100- and 50-day simple moving average lines. The 52-week range was $8.00 to $21.86.

The price-book ratio is 0.2 versus the industry median of 1 and the enterprise value-EBITDA ratio is 6.36 versus the industry median of 7.47.

The 14-day relative strength index of 35 suggests the stock is near oversold levels.

The Pittsburgh, Pennsylvania-based producer of natural gas, natural gas liquids and crude oil has a debt-equity ratio of 0.44, which is almost in line with the industry median of 0.46.

GuruFocus assigned a moderate rating of 4 out of 10 for the company’s financial strength and a very positive rating of 7 out of 10 for its profitability.

ObsEva SA

Shares of ObsEva SA closed at a price of $3.68 per unit on Wednesday for a market cap of $161.18 million. The stock price tumbled 73% over the past 12 months through Jan. 15. Analysts from Wall Street recommend a strong buy for this stock and have set an average target price of $21.8, which reflects a 490% upside.

The closing share price on Wednesday was below the 200- and 100--day simple moving average lines but still slightly above the 50-day SMA line. The 52-week range was $2.37 to $14.59.

The price-book ratio is 2.31 versus the industry median of 3.75.

The 14-day relative strength index of 48 suggests the stock is not oversold yet, although the share price went through a sharp devaluation.

The Swiss biotechnology company has a debt-equity ratio of 0.39 compared to the industry median of 0.11.

Disclosure: I have no positions in any securities mentioned.

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About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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