Falling knives are companies whose share prices have declined more than 59% over the last 12 months. Some investors hold these stocks because they believe that the share price will bounce back.
Such deep depreciation implies a remarkable risk of loss, as it could signal that the companies are having serious financial issues. However, investors can significantly reduce the risk if they select falling knives with moderate-to-low debt-equity ratios.
In addition to moderate-to-low financial burdens, the following stocks have a recommendation rating of buy.
Here are some results from the search.
Shares of Callon Petroleum Co. (CPE, Financial) closed at $4.08 on Friday for a market capitalization of $931.48 million. The stock price decreased 61.76% over the last 12 months through Sept. 6.
The Houston, Texas-based independent oil and natural gas company has a debt-equity ratio of 0.45 versus the industry median of 0.48. The debt-equity ratio of Callon Petroleum is ranked higher than 181 out of 340 companies operating in the oil and gas exploration and production industry.
GuruFocus assigned a moderate financial strength rating of 5.3 out of 10 and a very positive profitability and growth rating of 7 out of 10.
The closing price on Friday was significantly below the 200-, 100- and 50-day simple moving average lines. The 52-week range was $3.75 to $13.09.
The price-book ratio is 0.39 versus the industry median of 0.91, and the enterprise value-Ebitda ratio is 4.18 versus the industry median of 4.83.
The 14-day relative strength index of 42 suggests the stock is still far from oversold levels.
Wall Street issued a recommendation rating of buy with an average target price of $8.67.
Shares of Spectrum Pharmaceuticals Inc. (SPPI, Financial) closed at $7.55 on Friday for a market capitalization of approximately $852.06 million. The stock price has declined 63.26% over the past 12 months through Sept. 6.
The Henderson, Nevada-based biotechnology company has a debt-equity ratio of 0.02 versus the industry median of 0.18. The debt-equity ratio of Spectrum Pharmaceuticals is ranked higher than 667 out of a total of 763 companies operating in the biotechnology industry.
GuruFocus assigned a positive financial strength rating of 6.1 out of 10, but a very low profitability and growth rating of 2 out of 10. Thus, investors need to be careful with this stock.
Friday's closing share price was below the 200-, 100- and 50-day simple moving average lines. The 52-week range was $6.22 to $23.4.
The price-book ratio is 3.26 versus the industry median of 3.25, and the price-sales ratio is 14.46 versus the industry median of 9.
The 14-day relative strength index of 48 suggests the stock is neither overbought nor oversold.
Wall Street issued a recommendation rating of buy with an average target price of $23.20.
Disclosure: I have no positions in any securities mentioned.
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