Wall Street recommends purchasing shares of Ra Medical Systems Inc (RMED, Financial) and Baudax Bio Inc (BXRX, Financial), which sounds quite unexpected since these two equities have shown poor performance over the prior 52 weeks through March 9. With positive recommendations despite the share price tumble, these two stocks have earned the nickname "falling knives."
Investors who purchase falling knives are trying to catch them close to their lowest levels because they are aiming to make impressive gains out of their investments following an expected strong share price rebound. However, investors must be cautious with this type of investment as trading falling knives implies a remarkable risk. The strong decline in the share price could be a signal of permanent issues.
Ra Medical Systems Inc
Based in Carlsbad, California, Ra Medical Systems Inc is a commercial-stage medical developer of excimer lasers that are used by physicians to treat vascular and dermatological immune-mediated inflammatory diseases.
Shares of Ra Medical Systems Inc were trading at around $5.81 per share at close on Tuesday following an 81.50% decline in the share price over the past 52 weeks.
The stock has a market capitalization of $18.73 million, a 52-week range of $4.25 to $36.50 and a 14-day relative strength index of 35, which indicates the stock is trading not so far from oversold levels.
GuruFocus assigned a score of 3 out of 10 for the financial strength rating of the company. With regard to the profitability of the company, almost all the ratios are performing bad, except for three-year revenue growth rate of 3.5%, which is only slightly below the industry median of 5.2%.
The Piotroski F-Score of 2 out of 9 indicates a chance of bankruptcy within the next two years, as the financial situation of the company is precarious.
On Wall Street, the stock has a recommendation rating of buy with a price target of $25 per share.
Baudax Bio Inc
Based in Malvern, Pennsylvania, Baudax Bio Inc is a biotechnology company that develops painkiller injections to treat physical discomfort of a moderate to severe degree and to use in combination with nonsteroidal anti-inflammatory drug analgesics.
Shares of Baudax Bio Inc were trading at around $1.28 per unit at close on Tuesday following a decline of 74% that occurred over the past 52 weeks.
The stock has a market capitalization of $89.78 million, a 52-week range of $0.97 to $5.57 and a 14-day relative strength index of 42, which suggests that the share price is still far from oversold levels despite the tumble.
GuruFocus assigned a score of 2 out of 10 for the financial strength rating of the company and 1 out of 10 for its profitability rating.
A Piotroski F-Score of 3 out of 9 and an Altman Z-Score of -4.96 both tell that there is a chance that the business could fail within the next two years.
On Wall Street, the stock has a median recommendation rating of buy with an average price target of $4.67 per share.
Disclosure: I have no positions in any securities mentioned.
Read more here:
- A Trio of Strong Performers to Consider
- 3 Graham-Style Stock Picks for the Value Investor
- A Trio of Stocks for Growth-Focused Investors
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.