Falling knives are companies whose stocks have fallen more than 59% over the last 52 weeks. Investments in these securities are based on expectations of impressive rewards following a rebound in the share price.
Since these types of declines could be a sign of financial distress, investors are typically cautious about these stocks as their portfolios could be damaged if the company fails.
However, if falling knives have a moderate to low financial burden, the risk of loss is lower.
In addition to a moderate to low debt-to-equity ratio, the following securities have a recommendation rating of hold, which means analysts suggest investors maintain their positions in these companies despite the sharp drop in the share price.
Here are some results from my search.
Shares of Gulfport Energy Corp. (GPOR, Financial) closed at $2.87 on Thursday for a market capitalization of $457.47 million. The stock declined 73.2% over the last 12 months through Sept. 12.
The Oklahoma-based oil and gas producer has a debt-equity ratio of 0.63 compared to the industry median of 0.48.
GuruFocus assigned a moderate financial strength rating of 4.5 out of 10 and a very positive profitability and growth rating of 7 out of 10.
The closing share price on Thursday was below the 200-, 100- and 50-day simple moving average lines. The 52-week range was $2.28 to $11.94.
The price-sales ratio is 0.39 versus the industry median of 1.58 and the enterprise value-Ebitda ratio is 2.81 compared to the industry median of 4.98.
The 14-day relative strength index of 47 suggests the stock is neither overbought not oversold.
Wall Street issued a hold recommendation rating with an average target price of $6.25.
Shares of Resolute Forest Products Inc. (RFP, Financial) closed at $5.1 per share on Thursday for a market capitalization of $455.4 million. The stock fell 65.54% over the past 12 months through Sept. 12.
The Canadian producer of pulp, paper, tissue and wood products has a low debt-equity ratio of 0.31 compared to the industry median of 0.57.
GuruFocus assigned a positive rating of 5.6 out of 10 for the company's financial strength and a 5 out of 10 rating for its profitability and growth.
The closing price on Thursday was below the 200-, 100- and 50-day simple moving average lines. The 52-week range was $4.17 to $15.38.
The price-book ratio is 0.3 versus the industry median of 0.92 and the price-sales ratio is 0.13 versus the industry median of 0.56.
The 14-day relative strength index of 57 suggests the stock is neither overbought nor oversold.
Wall Street issued a hold recommendation rating with an average target price of $7.75.
Disclosure: I have no positions in any securities mentioned.
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