The following companies are falling knives since their share prices have declined more than 59% over the past year through May 13. Some investors buy these stocks because they believe they can rebound strongly and beat the overall market with impressive margins.
Wall Street issued a recommendation rating of overweight to buy for all three stocks, increasing the likelihood of them outperforming the S&P 500 index within 52 weeks.
What’s more, since a sharp decline in the share price may anticipate financial distress, investing in falling knives carries a high risk of bumping into severe losses. Investors, however, can significantly scale down this risk if they add a GuruFocus financial strength rating of at least 5 out of 10 to their screening criteria.
Here are the results of my search.
Celldex Therapeutics Inc. (CLDX, Financial) closed at $3.1 per share on Monday after a 71% decline over the past 12 months through May 13, sending the price below the 200, 100 and 50-day simple moving average lines. The closing price on Monday was 14.8% off the 52-week low of $2.7 and 272.6% from the 52-week high of $11.55.
The Hampton, New Jersey-based biopharmaceutical company has a market capitalization of $42.82 million. The price-book ratio is 0.3.5 versus the industry median of 4.1 and the price-sales ratio is 4.92.
GuruFocus assigned a financial strength rating of 6 out of 10 and a profitability and growth rating of 4 out of 10.
Wall Street issued a buy recommendation rating with an average target price of $19, reflecting a 513% growth from the share price at close on Monday.
The 14-day relative strength index of 41.9 suggests the stock is neither overbought nor oversold.
Aerpio Pharmaceuticals Inc. (ARPO, Financial) closed at $1 per share on Monday for a market capitalization of roughly $42.21 million. The stock declined 74% over the past year through May 13, sending the share price below the 200, 100 and 50-day simple moving average lines. The share price at close on Monday was 13.6% off the 52-week low of 88 cents and 395% from the 52-week high of $4.95.
Headquartered in Cincinnati, Ohio, the biopharmaceutical company has a price-book ratio of 0.73 versus the industry median of 4.1 and a price-sales ratio of 2.05.
GuruFocus assigned a financial strength rating of 9 out of 10 and a profitability and growth rating of 4 out of 10.
Wall Street issued an overweight recommendation rating with an average target price per share of $9.4, reflecting 840% upside from Monday's closing price.
The 14-day relative strength index of 39 suggests the stock is not so far from oversold levels.
Shares of Dawson Geophysical Co. (DWSN, Financial) closed at $2.3 on Monday for a market capitalization of $52.14 million. The stock has declined 70% over the last 52 weeks through May 13.
The chart below shows the stock is trading below the 200, 100 and 50-day simple moving average lines. The closing share price on Monday was 4.5% above the 52-week low of $2.2 and 265.2% below the 52-week high of $8.4.
Dawson Geophysical Co. is a Midland, Texas-based provider of onshore seismic data acquisition services to North American oil and gas operators. The stock has a price-book ratio of 0.45 versus the industry median of 1.19 and a price-sales ratio of 0.35 versus the industry median of 1.
GuruFocus assigned a financial strength rating of 6 out of 10 and a profitability and growth rating of 2 out of 10.
Wall Street issued an overweight recommendation rating with an average target price per share of $4, which represents 74% upside from the closing price on Monday.
The 14-day relative strength index of 32 suggests the stock is near oversold levels.
Disclosure: I have no positions in any securities mentioned.
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