Friday, October 09, 2009
Rich Duprey :: Townhall.com Columnist
5 Deathbed Stocks?
by Rich Duprey
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We've all heard of the "death rattle," the last gasp from a lost soul's lungs. Sometimes, we seem to hear it from the companies in which we invest. Revenues dry up. Margins contract. Profits evaporate. All these signs suggest that their condition is worsening -- a financial death rattle, if you will.

Stocks in sickbay
Don't assume that all such companies are goners. Some will barely cling to life, while others will make a fully recovery. Sure it happens, but here we're seeking companies that have all but given up the ghost.

For help, we'll turn to the clever coroners at our 140,000-strong Motley Fool CAPScommunity, where members give the thumbs-up or thumbs-down to some 5,300 stocks. We've unearthed a handful of stocks that look like they might be headed six feet under based on their one-star ratings, but we'll head over to CAPS to measure their opinions on a company's prospects.

Then we'll palpate their pulse with some quick tests for liquidity -- who knows, maybe we'll still find some signs of life! The current ratio and quick ratio(also called the "acid test" ratio) give us an idea of a company's ability to pay its bills, and the Altman Z-Score suggests companies in danger of bankruptcy. Companies scoring 3.00 and above are considered safe, between 2.70 and 2.99 are "yellow flags," between 1.80 and 2.70 have a good chance of going bankrupt within two years, and those with scores below 1.80 mean the cryptkeeper is waiting.

Here's today's list. The question is, with our primaryscreen being those stocks that CAPS investors have given one-star status to, are these companies only mostlydead, or have they already given up the ghost?

Stock

CAPS Rating

Current Ratio

Acid-Test Ratio

Altman Z-Score

Recent Price

Alico

*

4.1

2.7

2.64

$28.94

Bon-Ton Stores (Nasdaq: BONT)

*

2.0

0.1

2.14

$8.12

Carnival (NYSE: CUK)

*

0.4

0.3

2.09

$34.79

Krispy Kreme Doughnuts (NYSE: KKD) Continued...

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About The Author

Rich Duprey is a writer specializing in the stock market.

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