The following securities are falling knives, meaning their share prices have plunged more than 59% over the last 52 weeks. Some investors hold positions in these stocks because they project remarkable return out of them when their share prices rebound.
Investors are also aware that such a deep downfall in the share price can be a sign of financial distress, which will cause a major loss if it turns to insolvency.
The catching of falling knives is a high-risk transaction that investors can temper by owning shares of companies that have a moderate to low debt-equity ratio.
Infinera Corp. (INFN, Financial) closed at $2.9 per share on Thursday after plunging 71% over the past year through July 11, pushing the price down to below the 200-, 100- and 50-day simple moving average lines. The closing price on Thursday was 3.6% above the 52-week low of $2.8 and 253.4% below the 52-week high of $10.25.
The Sunnyvale, California-based worldwide provider of optical transport networking equipment has a market capitalization of $513.79 million. The price-book ratio is 0.81 versus the industry median of 1.8, and the price-sales ratio is 0.45 versus the industry median of 1.18.
Infinera has a moderate debt-equity ratio of 45% versus the industry median of 30%. GuruFocus assigned a financial strength rating of 4.7 out of 10 and a profitability and growth rating of 4 out of 10.
Investors must be careful with this stock as GuruFocus says it has an Altman Z-Score of -0.26 indicating it is in the distress zone.
Wall Street issued a hold recommendation rating for shares of Infinera with an average target price of $5.56, reflecting nearly 95% upside from the closing price on Thursday.
The 14-day relative strength index of 39 suggests the stock has not reached oversold levels yet, but it is almost there.
Shares of Unit Corp. (UNT, Financial) was trading at around $8 at close on Thursday. The stock has fallen 70% over the past 12 months through July 11, sending the share price below the 200-, 100- and 50-day simple moving average lines. The closing price on Thursday was 4.2% above the 52-week low of $7.68 and 263.3% below the 52-week high of $29.06.
The Tulsa, Oklahoma-based oil and gas drilling company has a market capitalization of $443.76 million, a price-book ratio of 0.33 versus the industry median of 0.46 and a price-sales ratio of 0.53 compared to the industry median of 0.55.
The oil and gas operator has a moderate debt-equity ratio of 50% versus the industry median of 65%. GuruFocus assigned a financial strength rating of 4.8 out of 10 and a profitability and growth rating of 5 out of 10.
GuruFocus indicates that Unit Corp. is in the distress zone, as the company has an Altman-Z Score of 0.85. Therefore, investors need to be cautious with this stock.
Wall Street issued a hold recommendation rating with average target price of $16.83 for shares of Unit Corp. The estimate represents 110.4% upside from Thursday's closing price.
The 14-day relative strength index of 36 suggests the stock is approaching oversold levels.
Abeona Therapeutics Inc. (ABEO, Financial) closed at $4.3 per share on Thursday after declining 72% over the past 52 weeks through July 11, sending the share price to below the 200-, 100- and 50-day simple moving average lines. The closing price on Thursday was 3.4% above the 52-week low of $4.16 and 272.1% below the 52-week high of $16.
Headquartered in New York, Abeona Therapeutics Inc. is a clinical-stage biopharmaceutical company that is developing cell and gene therapies for deadly rare genetic diseases.
The stock has a market capitalization of $215.81 million, a price-book ratio of 1.75 versus the industry median of 3.36 and a price-sales ratio of 487.81 versus the industry median of 10.51.
Abeona Therapeutics has no debt. GuruFocus assigned a financial strength rating of 6.6 out of 10 and the lowest rating of 1 out of 10 for profitability and growth.
Additionally, the Altman Z-Score is -1.91, indicating the distress zone for Abeona.
Wall Street issued a buy recommendation rating for shares of Abeona Therapeutics with an average target price of $21.78, reflecting nearly 406.5% upside from the closing price on Thursday.
The 14-day relative strength index of 30 suggests the stock is near oversold levels.
Disclosure: I have no positions in any securities mentioned.
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