Xeris Pharmaceuticals Inc (XERS, Financial) and Yield10 Bioscience Inc (YTEN, Financial) have seen their share prices decline more than 59% over the past 52 weeks, but Wall Street sell side analysts still recommend buying them, earning the name of "Falling Knives."
Some investors buy shares of falling knives because they expect a correction in the share price, followed by impressive gains. However, investors should be aware of the significant risks associated with these picks, as there is a chance their businesses may not recover.
Xeris Pharmaceuticals Inc
Xeris Pharmaceuticals Inc is a Chicago-based biotech developer of ready-to-use injectable and infusible drug formulations to treat severe forms of hypoglycemia as well as epilepsy and diabetes.
The stock price closed at $3.29 per share on Tuesday following a nearly 72% fall over the past 52 weeks.
The stock has a market capitalization of $152.25 million, a 52-week range of $1.42 to $12.98 and a 14-day relative strength index of 53, which indicates that the share price is far from oversold levels despite the downtrend.
GuruFocus assigned a rating of 2 out of 10 for the company's financial strength, which is the result of a high debt-equity ratio of 2.16, a low Piotroski F-Score of 2 out of 9 and an Altman Z-Score of -4.86, which signals the possibility of bankruptcy within two years.
As of August, the stock has two strong buy recommendation ratings and two buy recommendation ratings on Wall Street. Sell-side analysts have established an average target price of $11, which represents a 234.3% growth from Tuesday's closing price.
Yield10 Bioscience Inc
Yield10 Bioscience Inc is a Woburn, Massachusetts-based agricultural bioscience developer of unsettling technologies for the development of high value soybean, oilseed, forage sorghum and potato traits as well as improved crop yield in North America.
The stock price traded at around $6.55 per share at close on Tuesday following an 84.4% decline over the prior 52 weeks of trading.
The stock has a market capitalization of $12.91 million, a 52-week range of $3.50 to $51.2 and a 14-day relative strength index of 55, which tells that this stock is still trading far from oversold levels even though its share price fell sharply.
GuruFocus assigned a low score of 3 out of 10 for the financial strength of the company. The stock has a moderate debt-equity ratio of 0.43. The Piotroski F-Score of 4 out of 9 is average, but the Altman Z-Score of -35.47 indicates that the company is in distress zones with a high possibility of going bankrupt over the next two years.
As of August, one analyst on Wall Street recommends a strong buy rating and another analyst recommends a buy rating for the stock. The average target price of $13.33 per share implies a 103.5% upside from Tuesday's closing price.
Disclosure: I have no positions in any securities mentioned.
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