Wall Street holds an optimistic outlook about Falcon Minerals Corp (FLMN, Financial) and CynergisTek Inc (CTEK, Financial), even though these two holdings have fallen by more than 59% over the past 52 weeks. On Wall Street, sell-side analysts recommend to buy shares of these so-called "falling knives."
Some investors purchase stocks of falling knives because they expect to make impressive gains out of their investments following a strong rebound in the share prices. These investors should also be also aware that these kinds of holdings imply a significant investment risk.
Falcon Minerals Corp
Falcon Minerals Corp is a New York-based owner of oil and natural gas mineral assets which are located in North America. The stock traded at a price of $2.61 per share at close on Friday after a decline of 61% which occurred over the past 52 weeks.
The stock has a market capitalization of $224.52 million, a 52-week range of $1.60 to $7.25 and a 14-day relative strength index of 42, which suggests that the share price is still trading far from oversold levels despite the tumble.
GuruFocus assigned a positive rating of 5 out of 10 for the company's financial strength, as an Altman Z-score of 3.45 (higher than 2.99) indicates extreme low possibility of insolvency within two years. Also, the debt-equity ratio of 0.32 (versus the industry median of 0.47) tells that the balance sheet is moderately leveraged, and the company can easily sustain the financial cost as signaled by the interest coverage ratio of 7.04.
The stock has an average price target of $4.58 per share on Wall Street, reflecting a 75.5% upside from Friday's closing price.
CynergisTek Inc
CynergisTek Inc is an Austin, Texas-based provider of cybersecurity, privacy and compliance services to businesses in the U.S. The stock was trading at a price of $1.18 per share at close on Friday following a decline of 62% over the past 52 weeks of trading.
The stock has a market capitalization of $12.50 million, a 52-week range of $1.10 to $4.04 and a 14-day relative strength index of 39, which tells that the share price is still far from oversold levels.
GuruFocus assigned a positive score of 6 out of 10 for the financial strength of the company. This is mainly the result of a low debt-equity ratio of 0.12 (compared to the industry median of 0.22), although a Piotroski F-Score of 1 out of 9 and an Altman Z-Score of 0.61 (less than 1.81) indicate poor business conditions and the possibility of bankruptcy within two years.
The stock has an average target price of $4 per share on Wall Street, which mirrors a 239% upside from Friday's closing price.
Disclosure: I have no positions in any securities mentioned.
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