2 Falling Knives With a Buy Recommendation Rating
Falling knives are companies whose share prices have declined more than 59% over the last 52 weeks. There are investors who acquire shares of these stocks because they expect that the stock's price will bounce back enough to generate large returns.
However, the investment is not without any risk. In fact, the tumble in the share price could be the beginning of financial distress, which may hurt an investor's portfolio badly if the business fails.
However, choosing falling knives with a moderate to low financial burden can meaningfully lower the risk of loss.
Along with a moderate to low debt-equity ratio, the following securities have buy recommendation ratings, enhancing the probability that the investment will be successful.
Ashford Inc.
Shares of Ashford Inc. (AINC) closed at $21.15 on Friday for a market capitalization of $54.59 million. The stock declined 64% over the last 12 months through Oct. 25.
The Dallas-based asset management firm has a debt-equity ratio of 0.17, which is below the industry median of 0.24.
GuruFocus assigned a moderate rating of 5 out of 10 for the company's financial strength, but a low rating of 3 out of 10 for its profitability.
The closing price on Friday was below the 200-, 100- and 50-day simple moving average lines. The 52-week range was $19.43 to $71.6.
The price-book ratio is 0.81 compared to the industry median of 1.03 and the price-sales ratio is 0.23 versus the industry median of 4.04.
The 14-day relative strength index of 33 suggests the stock is approaching oversold levels.
Wall Street issued a buy recommendation rating with an average target price of $73.
Zovio Inc.
Shares of Zovio Inc. (NASDAQ:ZVO) closed at $1.39 per share on Friday for a market capitalization of $42.06 million. The stock declined 85% over the past 12 months through Oct. 25.
The Chandler, Arizona-based provider of education technology services in the U.S. has a debt-equity ratio of 0.12, which is below the industry median of 0.32.
GuruFocus assigned a high rating of 8 out of 10 for the company's financial strength and a very positive rating of 7 out of 10 for its profitability.
The closing price on Friday was below the 200-, 100- and 50-day simple moving average lines. The 52-week range was $1.33 to $10.55.
The price-book ratio is 0.34 compared to the industry median of 1.86 and the price-sales ratio is 0.09 versus the industry median of 2.07.
The 14-day relative strength index of 25 suggests the stock is oversold.
Wall Street issued a buy recommenn rating with an average target price of $10.
Disclosure: I have no positions in any securities mentioned.
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This article first appeared on GuruFocus.
