Wall Street recommends purchasing shares of DSS Inc (DSS, Financial) and KE Holdings Inc (BEKE, Financial). This sounds quite surprising, as these two equities have not performed well over the past 52 weeks through Oct. 21. With positive recommendations despite the share price tumble, these two stocks have earned the status of "falling knives."
Investors try to catch stocks like these close to their lowest levels because, in doing so, they hope to gain the highest return possible following an expected rebound in the share price. However, investors must be cautious when investing in falling knives as these kinds of holdings carry remarkable risk. The strong decline in the share price could be a sign of permanent issues.
DSS Inc
Based in Victor, New York, DSS Inc (DSS, Financial) is a manufacturer, marketer and seller of printed materials as well as packaging and security printing solutions.
Shares were trading around $1.17 at close on Thursday following a decrease of 71% over the past 52 weeks.
The stock has a market capitalization of approximately $93.30 million, a 52-week range of $1.135 to $7.62 and a 14-day relative strength index of 43, which indicates the stock is still far from oversold levels.
The balance sheet looks solid as GuruFocus has assigned a score of 6 out of 10 for the financial strength of the company. The Altman Z-Score of 2.24 coupled with a low value of 2 for the Piotroski F-Score indicates that the company is in financial distress and has a possibility of going bankrupt within two years. It must also be added that the amount of cash on hand, $65.6 million as of June 29, surpasses total debt of $8.3 million greatly, so as long as the company's profits do not decrease significantly, it should be able to meet its financial obligations.
Regarding profitability, ratios such as the operating and net margins and the returns on total assets, equity and capital are all negative, as are the three-year revenue and Ebitda per share growth rates.
On Wall Street, one analyst recommends a buy rating with a share price target of $5 for this stock.
KE Holdings Inc
Based in Beijing, China, KE Holdings operates an online platform for housing transactions and services in China.
Shares were trading around $25.06 at close on Thursday following a 64.2% decline over the past 52 weeks.
The market capitalization is about $29.84 billion, the 52-week range is $15.15 to $79.4 and the 14-day relative strength index is 71, suggesting that the stock is far from oversold levels despite the tumble; in fact, it is actually close to overbought levels.
Regarding its financial strength, GuruFocus assigned a score of 7 out of 10 to the company, which means that the balance sheet is solid.
In terms of profitability, operations are scoring very low with a 1 out of 10 according to GuruFocus. Despite rapid top and bottom-line growth, the company's operating and net margins are low, and it is still a young company. There is not even enough data to give the company a Piotroski F-Score, which is a key component of GuruFocus' profitabilty ranking, so the company may not be as unprofitable as it first appears.
On Wall Street, the stock has a median recommendation rating of overweight and an average price target of about $24.71 per share.
