The share price of Teck Resources Ltd TECK and Diamondback Energy Inc FANG fell by more than 59% over the past 52 weeks. Nonetheless, Wall Street sell-side analysts recommend a strong buy for these two falling knives and estimate impressive margin returns of over 100% to make out of the expected rebound.
Investors should be aware that such a sharp decline in the share price could be a signal of serious financial problems that can damage their portfolio severely if the business fails. However, these two falling knives have a moderate to low debt-equity ratio, which may lower the risk of bankruptcy.
Teck Resources Ltd
Shares of Teck Resources Ltd closed at a price of $7.27 per unit on Thursday for a market capitalization of $4.01 billion. The stock fell by 69.32% in the past 52 weeks through April 3.
Currently, the share price trades at a nearly 55% discount to the middle point of the 52-week range of $5.60 to $25.75. The 14-day relative strength index of 42 tells that the share price is still very far from oversold levels despite the tumble.
The Canadian global industrial metals and mining company has a low debt-equity ratio of 0.27. The Altman Z-score of 1.03 is less than 1.81, which signals that Teck Resources may be in distress zones. However, the Piotroski F-Score of 4 out of 9 suggests that the company is still financially stable.
Wall Street sell-side analysts suggests a strong buy recommendation and forecast the share price will hit a target of $18.09, which reflects a 150% upside from Thursday’s closing price.
Diamondback Energy
Shares of Diamondback Energy Inc closed at a price of $29.05 per unit on Thursday for a market capitalization of $4.6 billion. The share price declined by 71% in the past 52 weeks through April 3.
Currently, the shares trade about 55% below the middle point of the 52-week range of $14.55 to $114.14. The 14-day relative strength index of 41 indicates that the share price is still very far from oversold levels despite the significant downturn.
The Midland, Texas-based independent acquirer, developer and explorer of oil and natural gas reserves in West Texas has a moderate debt-equity ratio of 0.41, which is also slightly better than the industry median of 0.47. The Altman Z-Score of 0.55 indicates that Diamondback Energy is in distress zones, but the Piotroski F-Score of 4 out of 9 suggests financial stability.
Wall Street sell-side analysts have released a strong buy recommendation for the stock with a price target of $58.22 per share.
Disclosure: I have no positions in any securities mentioned.
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