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Wall Street Suggests Catching These 2 Falling Knives

Falling knives refer to stocks whose share prices have fallen more than 59% over the last 12 months. Some investors purchase shares of these securities because they expect that their prices will bounce back, generating impressive rewards.

The harsh fall in the share price, however, could be due to underlying business and financial issues, which may cause serious damage to the wealth of an investor if the business goes bankrupt. Thus, investors must be aware of the risk they run when keeping these investments in their portfolio.


Falling knives with a moderate to low debt-equity ratio may lower the risk of loss. In light of this, investors may want to consider the following falling knives, as they have also received positive recommendation ratings from Wall Street sell-side analysts.

Schlumberger

Shares of Schlumberger Ltd (NYSE:SLB) closed at a price of $16.16 on Friday for a market capitalization of $22.43 billion. The stock declined 63% in the past 12 months through March 13.

The closing price on Friday was below the 200-, 100- and 50-day simple moving average lines. The 52-week range is $12.91 to $48.88.

The 14-day relative strength index of 20 tells that the share price trespassed oversold levels.

The Texas-based supplier of equipment and services to oil and gas operators worldwide has a moderate debt-equity ratio of 0.64, although it is lower than than the industry median of 0.48. The Altman Z-score of 0.95 is less than 1.81, which indicates that Schlumberger may be in distress zones. This is mitigated by a Piotroski F-Score of 5 out of 9, which suggests that the company is still financially stable.

Wall Street sell-side analysts recommend a moderate buy rating for this stock and have set an average target share price of $38.80.

EOG Resources

Shares of EOG Resources Inc (NYSE:EOG) closed at a price of $34.8 per unit on Friday for a market capitalization of $20.26 billion. The share price has declined 62% in the past year through March 13.

The closing price on Friday was below the 200-, 100- and 50-day simple moving average lines. The 52-week range was $30.25 to $107.89.

The Texas-based oil and gas explorer and producer has a debt-equity ratio of 0.26, which is better than the industry median of 0.48. EOG Resources is in grey zones with its Altman Z-score of 2.19 and has a Piotroski F-Score of 5 out of 9.

The 14-day relative strength index of 22 suggests the share price trespassed oversold levels.

Wall Street sell-side analysts issued a moderate buy recommendation rating for this stock and established an average target price of $81 per share.

Disclosure: I have no positions in any securities mentioned.

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This article first appeared on GuruFocus.