U.S. Markets closed
  • S&P 500

    4,704.54
    +15.87 (+0.34%)
     
  • Dow 30

    35,870.95
    -60.10 (-0.17%)
     
  • Nasdaq

    15,993.71
    +72.14 (+0.45%)
     
  • Russell 2000

    2,363.59
    -13.42 (-0.56%)
     
  • Gold

    1,861.20
    -0.20 (-0.01%)
     
  • Silver

    24.88
    -0.02 (-0.08%)
     
  • EUR/USD

    1.1369
    -0.0006 (-0.0568%)
     
  • 10-Yr Bond

    1.5890
    -0.0150 (-0.94%)
     
  • Vix

    17.59
    +0.48 (+2.81%)
     
  • GBP/USD

    1.3497
    -0.0003 (-0.0216%)
     
  • USD/JPY

    114.3040
    +0.0520 (+0.0455%)
     
  • BTC-USD

    54,086.50
    -347.24 (-0.64%)
     
  • CMC Crypto 200

    1,402.14
    -65.80 (-4.48%)
     
  • FTSE 100

    7,255.96
    -35.24 (-0.48%)
     
  • Nikkei 225

    29,683.09
    +84.43 (+0.29%)
     

Analysts Recommend Buying These 2 Falling Knives

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Falling knives are companies whose share prices have fallen more than 59% over the past 12 months. Some investors buy these securities as they think they will gain impressive returns once the stocks have bounced back.

Investors are also aware that a sharp decline in the market value of the security can be an indicator of financial distress. And, if the financial distress turns into bankruptcy, they will incur a severe loss. The bankruptcy risk can, however, be reduced substantially if investors pick those falling knives with moderate to low debt-equity ratios.

Here are some results from a search.

Aerie Pharmaceuticals Inc. (NASDAQ:AERI) closed at $22.8 per share on Friday after tumbling 66% over the past 12 months through July 26, pushing the share price below the 200-, 100- and 50-day simple moving average lines. Friday's closing price was 6.2% off the 52-week low of $21.47 and 213.8% below the 52-week high of $71.55.

The Durham, North Carolina-based ophthalmic pharmaceutical company has a market capitalization of $1.05 billion. The price-book ratio is 5.37 versus the industry median of 2.23 and the price-sales ratio is 28.9 versus the industry median of 2.6.

Aerie Pharmaceuticals has no debt.

GuruFocus assigned a financial strength rating of 8 out of 10 and a profitability and growth rating of 3 out of 10.

Wall Street issued an average target price of $75.22, reflecting nearly 240% upside from the closing price on Friday. Analysts recommend buying the stock.

The 14-day relative strength index of 31 suggests the stock is near oversold levels.

Shares of IntriCon Corp. (NASDAQ:IIN) closed at $17.8 on Friday. The stock has plunged 68% over the past 12 months through July 26, sending the share price to below the 200-, 100- and 50-day simple moving average lines. The closing price on Friday was 5.9% above the 52-week low of $16.81 and 331.5% below the 52-week high of $76.80.

The Arden Hills, Minnesota-based distributor of body-worn devices in the United States and internationally has a market capitalization of $155.52 million, a price-book ratio of 1.79 versus the industry median of 1.47 and a price-sales ratio of 1.31 compared to the industry median of 0.98. The price-earnings ratio is 27.81 versus the industry median of 16.58.

IntriCon Corp. has close to zero total debt-equity ratio versus the industry median of 35%. GuruFocus assigned a financial strength rating of 8 out of 10 and a profitability and growth rating of 6 out of 10.

Wall Street issued an average target price of $34 for shares of IntriCon Corp., representing 91% upside from Friday's closing price. Analysts suggest buying the stock.

The 14-day relative strength index of 34 suggests the stock is approaching oversold levels.

Disclosure: I have no positions in any securities mentioned.

This article first appeared on GuruFocus.