Analysts Suggest Catching These 2 Falling Knives
Wall Street sell-side analysts recommend a moderate buy for shares of Solaris Oilfield Infrastructure Inc (NYSE:SOI) and Cactus Inc (NYSE:WHD), although their share prices have dropped more than 59% over the past 12 months as of April 22. As a result of this fierce depreciation in the share price, these two stocks are known as falling knives.
There are investors who are interested in this type of stocks because they expect they will eventually rebound, bringing significant returns. Of course, holding shares of falling knives implies a remarkable risk of loss, because the huge depreciation in the share price could be a sign of financial issues.
Investors can reduce the investment risk of falling knives by choosing stocks whose balance sheets do not put them in immediate danger of bankruptcy.
Thus, investors may want to consider the following falling knives, as they have moderate to low debt-equity ratios.
Solaris Oilfield Infrastructure Inc
Shares of Solaris Oilfield Infrastructure Inc were trading at a price of $5.56 per unit at close on Wednesday for a market capitalization of $256.64 million. The stock price fell by 70% in the past year through April 22.
Currently, the share price represents a 53.3% discount to the middle point of the 52-week range of $4.50 to $19.31. The 14-day relative strength index of 42 tells us that the share price is still placed far from oversold levels, despite the tumble.
Solaris Oilfield Infrastructure Inc is a Houston, Texas-based provider of equipment and services for the transportation of large volumes of proppant and chemicals to oil and natural gas well sites in the U.S. The company has a very low debt-equity ratio of 0.03, which is better than the industry median of 0.46. The Altman Z-score of 3.24 is greater than 2.99, indicating that Solaris Oilfield is in safe zones. Furthermore, the Piotroski F-Score of 5 out of 9 suggests that Solaris Oilfield Infrastructure Inc is a financially stable company.
Wall Street sell-side analysts predict the share price will rebound up to a $10.21 target, which represents a nearly 84% upside from Wednesday's closing price.
Cactus Inc
Shares of Cactus Inc were trading at a price of $13.39 per unit at close on April 22 for a market capitalization of $1.01 billion. The stock price declined by 65% in the past year through April 22.
Currently, the share price trades at a nearly 45% discount to the middle point of the 52-week range of $8.16 to $40.68. The 14-day relative strength index of 46 indicates that the share price is still far from oversold levels, despite the sharp downturn.
Cactus Inc is a Houston, Texas-based provider of equipment and services for drilling, completion and production phases at its customers' onshore unconventional oil and gas wells. The company has service centers in the U.S. and Australia. The stock has a low debt-equity ratio of 0.12, which is better than the industry median of 0.46.
A moderate Piotroski F-Score of 4 out of 9 suggests that Cactus is a financially stable company. Also, the Altman Z-Score of 4.09 (greater than 2.99) tells us that Cactus is likely safe from bankruptcy for the next two years.
Wall Street sell-side analysts predict that the share price of Cactus will bounce back, gaining more than 30% from Wednesday's closing price to hit the average target price of $17.57 per share.
Disclosure: I have no positions in any securities mentioned.
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This article first appeared on GuruFocus.
