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Alberto Abaterusso
Alberto Abaterusso
Articles (1701) 

Consider These 2 Falling Knives

Roan Resources, TrueCar have moderate-to-low financial burdens

September 20, 2019 | About:

Falling knives are companies whose stocks have fallen more than 59% over the past year, drawing interest from investors as these securities can make huge gains if they rebound.

Investors are also aware that a sharp decline in the share price could signal financial distress, so their portfolio could be hurt if the company fails.

Investors can, however, significantly reduce the risk of loss if they pick falling knives with moderate-to-low debt-equity ratios.

Moreover, the following securities have received positive recommendation ratings ranging between hold and overweight from sell-side analysts on Wall Street, increasing the likelihood they will bounce back. Overweight means the stock is expected to outperform other players in its industry or the overall market in the coming weeks.

Here are some results from my search.

Shares of Roan Resources Inc. (NYSE:ROAN) closed at $1.67 on Thursday for a market capitalization of $257.29 million. The stock declined 90% over the past year through Sept. 19.

The Oklahoma City-based oil and gas producer has a moderate debt-to-equity ratio of 0.48 versus the industry median of 0.33.

Further, GuruFocus assigned a financial strength rating of 4.1 out of 10 and a profitability and growth rating of 5 out of 10.

The stock is trading below the 200- and 100-day simple moving average lines, but above the 50-day line. The 52-week range is $1 to $19.05.

The price-book ratio is 0.17 versus the industry median of 0.93 and the enterprise value-Ebitda ratio is 2.71 versus the industry median of 1.74.

The 14-day relative strength index of 66 suggests the stock is still very far from oversold levels despite the steep decline in the share price.

Analysts issued an overweight recommendation rating with an average target price of $4.86.

Shares of TrueCar Inc. (NASDAQ:TRUE) closed at $3.68 on Thursday for a market capitalization of $390.76 million. The stock declined 74% over the past 52 weeks through Sept. 19.

The Santa Monica, California-based information and communication services company has a low debt-equity ratio of 0.14 versus the industry median of 0.21.

GuruFocus assigned a financial strength rating of 6.3 out of 10 and a profitability and growth rating of 4 out of 10.

The share price is below the 200-, 100- and 50-day simple moving average lines. The 52-week range was $3.01 to $14.55.

The price-book ratio is 1.13 versus the industry median of 3 and the price-sales ratio is 1.04 versus the industry median of 2.02.

The 14-day relative strength index of 36 suggests the stock is near oversold levels.

Analysts issued a hold recommendation rating with an average target price of $4.9.

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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