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Alberto Abaterusso
Alberto Abaterusso
Articles (1711) 

3 Falling Knives With Low Debt-Equity Ratios

Antero Resources tops the list

June 14, 2019 | About:

Falling knives are companies whose share prices have fallen more than 59% over the last 12 months. Some investors hold positions in these stocks because they expect impressive returns on of their investments once they rebound.

Investors are also aware that a significant plunge in the market value of the security can indicate financial distress, so they will incur a severe loss if the company goes bankrupt. If investors focus on those falling knives with moderate to low debt-to-equity ratios, they can substantially reduce the risk.

Here are some results from my search.

Shares of Antero Resources Corp. (NYSE:AR) closed at $5.9 on Thursday for a market capitalization of $1.82 billion. The stock declined 70% over the last 12 months through June 13.

The Denver-based oil and gas producer has a debt-to-equity ratio of 42% versus the industry median of 46%. GuruFocus assigned a low financial strength rating of 4 out of 10, but a very high profitability and growth rating of 9 out of 10.

The closing price on Thursday was far below the 200-day simple moving average line. The 52-week range was $5.74 to $22.69.

The price-book ratio is 0.23 versus the industry median of 1.3 and the enterprise value-Ebitda ratio is 2.25 versus the industry median of 7.99.

The 14-day relative strength index of 32 suggests the stock is near oversold levels.

Wall Street issued a hold recommendation rating with an average target price of $11.62.

Shares of Sogou Inc. (NYSE:SOGO) closed at $4.2 per share on Thursday for a market capitalization of $1.65 billion. The stock declined 70% over the past 52 weeks through June 13.

The Chinese internet content and information company has no debt. GuruFocus assigned a very high financial strength rating of 9 out of 10, but a low profitability and growth rating of 4 out of 10.

Thursday's closing share price was below the 200-, 100- and 50-day simple moving average lines. The 52-week range was $3.85 to $15.5.

The price-book ratio is 1.61 versus the industry median of 3.65 and the price-sales ratio is 1.42 versus the industry median of 2.6.

The 14-day relative strength index of 37 suggests the stock is not far from oversold levels.

Wall Street issued a hold recommendation rating with an average target price of $6.01.

Shares of Whiting Petroleum Corp. (NYSE:WLL) closed at $16.7 on Thursday for a market capitalization of $1.52 billion. The stock fell 64% over the past year through June 13.

The Denver-based oil and gas producer has a debt-to-equity ratio of 68% versus the industry median of 46%. GuruFocus assigned a low financial strength rating of 4 out of 10 and a moderate profitability and growth rating of 5 out of 10.

The stock was trading below the 200-, 100- and 50-day simple moving average lines. The 52-week range was $16.05 to $56.47.

The price-book ratio is 0.35 versus the industry median of 1.3 and the enterprise value-Ebitda ratio is 3.68 versus the industry median of 7.99.

The 14-day relative strength index of 30 suggests the stock is approaching oversold levels.

Wall Street issued an overweight recommendation rating with an average target price of $34.06.

Disclosure: I have no positions in any securities mentioned.

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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.

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