1. How to use GuruFocus - Tutorials
  2. What Is in the GuruFocus Premium Membership?
  3. A DIY Guide on How to Invest Using Guru Strategies
Alberto Abaterusso
Alberto Abaterusso
Articles (1520) 

Analysts Recommend These 2 Falling Knives

Chaparral Energy, HighPoint Resources offer good value

May 22, 2019 | About:

Falling knives are stocks whose share prices have fallen more than 59% over the last 52 weeks. Some investors are interested in these stocks because they believe they will reward them with impressive margins once they have rebounded.

Investors are also aware that such a share price depreciation can be a sign of financial distress, which will cause a major loss if it turns to bankruptcy. The risk is very high with this kind of investment, but can be substantially reduced if investors consider only those falling knives with a moderate to low debt-to-equity ratio and a market cap above $50 million.

Stocks with low to moderate debt-equity ratios were also considered.

With these criteria in mind, I ran my screening. The results also include companies that received a recommendation rating of overweight to buy from Wall Street, increasing the chances of a successful bet.

In addition, I screened the oil and gas sector as an increase in the consumption of energy following the eventual construction of the U.S. barrier along the border with Mexico should produce a boost in the operating income of these companies, driving the share price up.

Chaparral Energy Inc. (NYSE:CHAP) closed at $4.2 per share on Tuesday after an 80% decline over the past year through May 21, sending the price below the 200-, 100- and 50-day simple moving average lines. The closing price on Tuesday was 2.4% off the 52-week low of $4.10 and 395.2% from the 52-week high of $20.80.

The Oklahoma City-based oil and gas producer has a market capitalization of $194.63 million. The price-book ratio is 0.25 versus the industry median of 1.3 and the enterprise value-earnings before interest, taxes, depreciaiton and amortization ratio is 11.26 compared to the industry median of 7.99.

Accoridng to GuruFocus, Chaparral Energy’s total debt-equity ratio is 43% versus the industry median of 46%. It is ranked higher than 171 out of a total of 301 companies operating in the industry.

Wall Street issued a buy recommendation rating with an average target price of $18.38, reflecting 338% upside from the closing price on Tuesday.

The 14-day relative strength index of 31 suggests the stock is near oversold levels.

Shares of HighPoint Resources Corp. (NYSE:HPR) closed at $2.3 on Tuesday for a market capitalization of $491.65 million. The stock decreased 67% over the past year through May 21, sending the share price below the 200-, 100- and 50-day simple moving average lines. The closing price on Tuesday was 11.7% above the 52-week low of $2.06 and 215.2% below the 52-week high of $7.25.

Headquartered in Denver, HighPoint Resources is a developer of mineral resources and a producer of oil and natural gas in the U.S.

The stock has a price-earnings ratio of 9.57 versus the industry median of 11.83, a price-book ratio of 0.44 versus the industry median of 1.3 and an enterprise value-Ebitda ratio of 3.39 compared to the industry median of 7.99.

HighPoint Resources’ total debt-equity ratio is 62% versus the industry median of 46%. According to GuruFocus, it is ranked lower than 226 out of a total of 301 operators in the industry.

Wall Street issued an overweight recommendation rating, meaning the stock is expected to outperform the market within 12 months. The average target price is $4.97, which represents 116.1% upside from Tuesday 's closing price.

The 14-day relative strength index of 42 suggests the stock is neither overbought nor oversold.

Disclosure: I have no positions in any securities mentioned.

Read more here:

Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.

About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

Rating: 0.0/5 (0 votes)

Comments

Please leave your comment:


Performances of the stocks mentioned by Alberto Abaterusso


User Generated Screeners


pjmason14Momentum
pascal.van.garsseHigh FCF-M2
kosalmmuse6
kosalmmuseBest one1
DBrizanall 2019Feb26
kosalmmuseBest one
DBrizanall 2019Feb25
kosalmmuseNice
kosalmmusehan
MsDale*52-Week Low
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GF Chat

{{numOfNotice}}
FEEDBACK