Shareholders of TechnipFMC PLC FTI and NexTier Oilfield Solutions Inc NEX have seen their holdings decline more than 59% over the past 52 weeks, but analysts still recommend to buy them, earning them the name of "Falling Knives."
Some investors purchase shares of falling knives because they believe that a share price reversal is just around the corner and that huge gains will follow. However, investors should also be aware of the considerable risks associated with these picks, as the chance that the underlying businesses may not recover is not small.
TechnipFMC PLC
TechnipFMC PLC Inc is a London-based provider of equipment and services to companies operating in the oil and gas industry.
The stock price traded at $6.67 per share at close on Wednesday as a result of a 70.5% decline over the past 52 weeks.
The stock has a market capitalization of $2.97 billion, a 52-week range of $4.49 to $23.74 and a 14-day relative strength index of 46, which indicates that the share price still trades far from oversold levels despite the share price slump.
GuruFocus assigned a rating of 4 out of 10 for the company's financial strength, which is mainly the result of a cash-debt of 0.9 (versus the industry median of 0.37), a Piotroski F-Score of 4 out of 9 and an Altman Z-Score of -0.3. These indicators signal that TechnipFMC PLC's financial situation is still typical of a stable company, although there is a possibility the business can go bankrupt within two years.
As of October, the stock has a moderate buy rating with an average target price of $11.01 per share on Wall Street, which represents a 65% upside from Wednesday's closing price.
NexTier Oilfield Solutions Inc
NexTier Oilfield Solutions Inc is a Houston, Texas-based supplier of equipment and services to oil and gas producers.
The stock price was trading at $1.87 per share at close on Wednesday after it fell by 64.5% over the prior 52 weeks of trading.
The stock has a market capitalization of $400.80 million, a 52-week range of $1 to $7.14 and a 14-day relative strength index of 43, which suggests that this stock is still trading far from oversold levels despite the severe share price downturn.
GuruFocus assigned a score of 5 out of 10 for the financial strength of the company, which is mainly driven by a debt-equity ratio of 0.55 (versus the industry median of 0.47), a Piotroski F-Score of 4 out of 9 and an Altman Z-Score of 1.17. These ratios indicate that NexTier Oilfield Solutions Inc is in distress zones with a possibility of failure within two years, though it is still a stable company from a balance sheet standpoint.
As of October, Wall Street recommends a strong buy rating with an average target price of $3.70 per share for the stock, which would imply 100% growth from Wednesday's closing price.
Disclosure: I have no positions in any securities mentioned.
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