Wall Street analysts recommend increasing holdings in Nine Energy Service Inc (NINE, Financial) and Kewaunee Scientific Corporation (KEQU, Financial), even though their share prices have dropped more than 59% in the past year through Jan. 23, attributing them the name of falling knives.
Some investors buy these stocks because they expect to be rewarded with impressive margins after share prices rebound, but they are also aware of the sizeable risk inherent in this type of investment, as they may suffer major damage if the underlying business fails.
However, if an investor picks falling knives with a moderate to low financial burden, they can significantly reduce the risk of loss.
Along with a moderate to low financial burden, the following securities have received recommendation ratings from Wall Street analysts ranging from overweight to buy.
Nine Energy
Shares of Nine Energy Service Inc closed at a price of $5.94 per unit on Jan. 23 for a market cap of $181.58 million. The stock price fell 76% over the past year through Jan. 23.
Wall Street sell-side analysts issued an overweight recommendation rating, which means they believe the share price will outperform within a year. The average target price of $9.06 mirrors a 52% upside.
The Houston-based oil and gas equipment and services operator has a moderate debt-equity ratio of 0.65 versus the industry median of 0.46. The stock is in distress zones according to an Altman Z-score of 1.04, but is not at that much risk of bankruptcy as its Piotroski F-Score is 5 out of 9.
The closing price on Thursday was below the 200-, 100- and 50-day simple moving average lines. The 52-week range was $4.34 to $26.69.
The price-book ratio is 0.3 versus the industry median of 1.0 and the enterprise value-EBITDA ratio is 11.72 versus the industry median of 7.47.
The 14-day relative strength index of 36 suggests the stock is not so far from oversold levels.
Kewaunee Scientific
Shares of Kewaunee Scientific Corporation closed at a price of $12.50 per unit on Thursday for a market capitalization of $34.37 million. The stock price fell 60% over the past year through Jan. 23.
Wall Street sell-side analysts recommend to buy shares of this stock and have established an average target price of $28.00, which reflects a 124% growth.
The Statesville, North Carolina-based manufacturer and installer of laboratory, healthcare and technical furniture products has a low debt-equity ratio of 0.38 compared to the industry median of 0.33. Also, the Piotroski F-Score of 3 out of 9 indicates the existence of poor operations. As a matter of fact, the need to grant a higher return to its long-term shareholders forced the company to suspend the payment of the quarterly dividend on Dec. 16. Kewaunee Scientific Corp has an Altman Z-score of 3.10, which tells that the company is not at a high risk of bankruptcy.
The closing share price on Thursday was below the 200-, 100- and 50-day simple moving average lines. The 52-week range was $12.33 to $32.80.
The price-book ratio is 0.77 versus the industry median of 1.47 and the price-sales ratio is 0.24 versus the industry median of 0.82.
The 14-day relative strength index of 30 suggests the stock is almost oversold.
Disclosure: I have no positions in any securities mentioned.
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