The following companies can be considered "falling knives" because their share prices have tumbled more than 59% over the past year through June 20. Some investors are interested in these stocks because they are expected to rebound and outperform the overall market.
Experienced investors know that such a decline in the share price can signal financial distress, which will cause a major loss if the company goes bankrupt. The risk is very high with these kinds of investments, but if investors look for companies with a low leverage balance sheet, the risk can be significantly reduced.
Thus, I have screened for falling knife stocks with either no debt or a low debt-equity ratio.
Further, I looked for stocks that have a buy recommendation rating.
Shares of Axogen Inc. (AXGN, Financial) closed at $19.77 on Thursday. The stock fell 61% over the past 12 months through June 20, sending the share price below the 200-, 100- and 50-day simple moving average lines. The closing price on Thursday was 40% above the 52-week low of $14.13 and 187.6% below the 52-week high of $56.85.
The Alachua, Florida-based provider of surgical solutions for physical damage or dissection of peripheral nerves has a market capitalization of $774 million. The price-book ratio is 5.50 versus the industry median of 3.06 and the price-sales ratio is 8.44 compared to the industry median of 3.15.
GuruFocus assigned a high financial strength rating of 8 out of 10 for Axogen. The rating was influenced by a debt-equity ratio of 0.03, which is ranked lower than 193 out of 220 companies operating in the medical devices industry. The industry median is 0.3.
The company's profitability and growth was rated with a score of 5 out of 10 by GuruFocus.
Wall Street issued an average target price of $33.80 for shares of Axogen. The estimate represents 71% upside from Thursday's closing price.
The 14-day relative strength index of 43 suggests the stock is neither oversold nor overbought.
Shares of Evolent Health Inc. (EVH, Financial) closed at $7.9 on Thursday after plummeting 66% over the past 52 weeks through June 20. The decline pushed the share price substantially below the 200-, 100- and 50-day simple moving average lines. The closing price on Thursday was 0.8% above the 52-week low of $7.84 and 267.7% below the 52-week high of $29.05.
The Arlington County, Virginia-based provider of solutions for health care delivery and payment in the U.S. has a market capitalization of $666.04 million. The stock has a price-book ratio of 0.56 versus the industry median of 2.93 and a price-sales ratio of 0.92 versus the industry median of 2.86.
GuruFocus assigned a financial strength rating of 6 out of 10 to Evolent Health’s, driven by a low debt-equity ratio of 0.20. Evolent Health’s debt-equity ratio is below the industry median of 0.27 and is ranked higher than 874 out of 1,267 companies operating in the Health Information Services industry.
GuruFocus also rated the company's profitability and growth, giving it a score of 3 out of 10.
Wall Street issued an average target price of $19.75 per share of Evolent Health, reflecting 150% upside from the closing price on Thursday.
The 14-day relative strength index of 25 suggests the stock is oversold.
Disclosure: I have no positions in any securities mentioned.
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