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Analysts Suggest Buying These 3 Falling Knives

- By Alberto Abaterusso

The following companies can be considered "falling knives" because their share prices have plunged more than 59% for the year to date through May 3. What's more, Wall Street has issued a buy recommendation rating for all three stocks.

Falling knives usually anticipate financial distress, and the risk of severe losses. If investors add a GuruFocus financial strength rating of at least 5 out of 10 to their screening, however, they can significantly reduce the risk.


Here are the results of a search.

Shares of Overstock.com Inc. (OSTK) closed at $12.9 on Friday for a market capitalization of roughly $415.15 million. The stock declined 66% over the last 52 weeks through May 3.

The specialty retailer's closing price on Friday was well below the 200, 100 and 50-day simple moving average lines. The 52-week range is $12.22 to $48.00.

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

The price-book ratio is 3.16 versus an industry median of 1.63, and the price-sales ratio is 0.24 versus an industry median of 0.68.

GuruFocus assigned a financial strength rating of 6 out of 10 and a profitability and growth rating of 5 out of 10.

Wall Street issued an average target price of $51, reflecting 295.35% upside from Friday's closing price.

CES Energy Solutions Corp. (CESDF) closed at $1.8 per share on Friday for a market capitalization of $467.77 million following a 66% decline for the past year.

Friday's closing price was below the 200, 100 and 50-day simple moving average lines. It was 2.3% off the 52-week low of $1.76 and 187% from the 52-week high of $5.16.

The 14-day relative strength index of 22 suggests the stock has practically reached oversold levels.

The provider of consumable chemical solutions to oil and gas operators has a price-earnings ratio of 13.79 versus the industry median of 18.04 and a price-book ratio of 0.91 versus an industry median of 1.19. The EV-Ebitda is 7.86 compared to the industry median of 11.92.

GuruFocus assigned a financial strength rating of 5 out of 10 and a profitability and growth rating of 7 out of 10.

Wall Street issued an average target price of $4.96, which reflects 175.6% upside from the closing share price on Friday.

Shares of SG Blocks Inc. (SGBX) closed at $1.2 on Friday for a market capitalization of $5.21 million. The stock has fallen 74% over the past year through May 3.

The chart below shows the stock is trading below the 200, 100 and 50-day simple moving average lines. The 52-week range is $1.01 to $5.9.

The 14-day relative strength index of 37 suggests the stock is near oversold levels.

The company, which is a provider of modules for buildings' construction in the U.S., has an EV-Ebitda ratio of 0.34 versus the industry median of 11.03.

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 $6, which represents 400% upside from the closing price on Friday.

Disclosure: I have no positions in any securities mentioned.

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This article first appeared on GuruFocus.