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    Lyons Magnus Expands Product Recall by Nearly 400 Products

    Lyons Magnus Expands Product Recall by Nearly 400 Products

    Brandstorm recalls Natierra Organic Freeze-Dried Blueberries

    Brandstorm recalls Natierra Organic Freeze-Dried Blueberries

    Canadian Tire 2Q Profit Falls as Russia Exit Costs Weigh

    Canadian Tire 2Q Profit Falls as Russia Exit Costs Weigh

    Avaya stock plunges toward record low after WSJ report that $600 million debt deal soured

    Avaya stock plunges toward record low after WSJ report that $600 million debt deal soured

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    We Think Alcoa (NYSE:AA) Can Stay On Top Of Its Debt

    We Think Alcoa (NYSE:AA) Can Stay On Top Of Its Debt

    Philip Morris International Inc. stock falls Friday, underperforms market

    Philip Morris International Inc. stock falls Friday, underperforms market

    CS Disco (NYSE:LAW) Reaches New 52-Week Low on Analyst Downgrade

    CS Disco (NYSE:LAW) Reaches New 52-Week Low on Analyst Downgrade

    Hanesbrands Foresees Declining Sales on FX Impact

    Hanesbrands Foresees Declining Sales on FX Impact

  • NASDAQ
    BeiGene (NASDAQ:BGNE) Has Debt But No Earnings; Should You Worry?

    BeiGene (NASDAQ:BGNE) Has Debt But No Earnings; Should You Worry?

    Moderna Inc. stock falls Friday, underperforms market

    Moderna Inc. stock falls Friday, underperforms market

    Booking Holdings Inc. (NASDAQ:BKNG) Sees Large Drop in Short Interest

    Booking Holdings Inc. (NASDAQ:BKNG) Sees Large Drop in Short Interest

    Poshmark’s stock drops 8% on Q3 revenue guidance

    Poshmark’s stock drops 8% on Q3 revenue guidance

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    China Eastern Airlines 3Q Loss Widens on Low Travel Demand

    China Eastern Airlines 3Q Loss Widens on Low Travel Demand

    Corus Entertainment 4Q Profit Falls

    Corus Entertainment 4Q Profit Falls

    Nintendo Co. Ltd. ADR falls Monday, still outperforms market

    Nintendo Co. Ltd. ADR falls Monday, still outperforms market

    Ocado Group PLC Revenue of Ocado Retail in Q3 Fell 10.6%

    Ocado Group PLC Revenue of Ocado Retail in Q3 Fell 10.6%

  • TSX
    US Seeks to Fine Air Canada $25.5 Million Over Slow Refunds

    US Seeks to Fine Air Canada $25.5 Million Over Slow Refunds

    S&P/TSX composite falls on drop in materials sector, loonie tops 81 cents US

    S&P/TSX composite falls on drop in materials sector, loonie tops 81 cents US

    Bitcoin Is Falling: Should You Buy the Dip?

    Bitcoin Is Falling: Should You Buy the Dip?

    CN Rail Stock Is So Undervalued That it’s Absurd

    CN Rail Stock Is So Undervalued That it’s Absurd

  • News
    Lyons Magnus Expands Product Recall by Nearly 400 Products

    Lyons Magnus Expands Product Recall by Nearly 400 Products

    Brandstorm recalls Natierra Organic Freeze-Dried Blueberries

    Brandstorm recalls Natierra Organic Freeze-Dried Blueberries

    Canadian Tire 2Q Profit Falls as Russia Exit Costs Weigh

    Canadian Tire 2Q Profit Falls as Russia Exit Costs Weigh

    Avaya stock plunges toward record low after WSJ report that $600 million debt deal soured

    Avaya stock plunges toward record low after WSJ report that $600 million debt deal soured

  • NYSE
    We Think Alcoa (NYSE:AA) Can Stay On Top Of Its Debt

    We Think Alcoa (NYSE:AA) Can Stay On Top Of Its Debt

    Philip Morris International Inc. stock falls Friday, underperforms market

    Philip Morris International Inc. stock falls Friday, underperforms market

    CS Disco (NYSE:LAW) Reaches New 52-Week Low on Analyst Downgrade

    CS Disco (NYSE:LAW) Reaches New 52-Week Low on Analyst Downgrade

    Hanesbrands Foresees Declining Sales on FX Impact

    Hanesbrands Foresees Declining Sales on FX Impact

  • NASDAQ
    BeiGene (NASDAQ:BGNE) Has Debt But No Earnings; Should You Worry?

    BeiGene (NASDAQ:BGNE) Has Debt But No Earnings; Should You Worry?

    Moderna Inc. stock falls Friday, underperforms market

    Moderna Inc. stock falls Friday, underperforms market

    Booking Holdings Inc. (NASDAQ:BKNG) Sees Large Drop in Short Interest

    Booking Holdings Inc. (NASDAQ:BKNG) Sees Large Drop in Short Interest

    Poshmark’s stock drops 8% on Q3 revenue guidance

    Poshmark’s stock drops 8% on Q3 revenue guidance

  • OTC
    China Eastern Airlines 3Q Loss Widens on Low Travel Demand

    China Eastern Airlines 3Q Loss Widens on Low Travel Demand

    Corus Entertainment 4Q Profit Falls

    Corus Entertainment 4Q Profit Falls

    Nintendo Co. Ltd. ADR falls Monday, still outperforms market

    Nintendo Co. Ltd. ADR falls Monday, still outperforms market

    Ocado Group PLC Revenue of Ocado Retail in Q3 Fell 10.6%

    Ocado Group PLC Revenue of Ocado Retail in Q3 Fell 10.6%

  • TSX
    US Seeks to Fine Air Canada $25.5 Million Over Slow Refunds

    US Seeks to Fine Air Canada $25.5 Million Over Slow Refunds

    S&P/TSX composite falls on drop in materials sector, loonie tops 81 cents US

    S&P/TSX composite falls on drop in materials sector, loonie tops 81 cents US

    Bitcoin Is Falling: Should You Buy the Dip?

    Bitcoin Is Falling: Should You Buy the Dip?

    CN Rail Stock Is So Undervalued That it’s Absurd

    CN Rail Stock Is So Undervalued That it’s Absurd

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Stock Watch: Get Rid of This Stock To Avoid Losses

avatar by Editor
November 25, 2019
0
Stock Watch: Get Rid of This Stock To Avoid Losses

Precise identification of rightly-priced stocks is the key to successful investing. However, in practice, overpriced toxic stocks and the correctly-priced stocks are intertwined in such a manner that it is difficult to distinguish between the two.
Generally, overhyped toxic stocks are susceptible to outside shocks. Moreover, these stocks are loaded with a high level of debt. The price of these stocks is artificially inflated. Nonetheless, the higher price of toxic stocks is only short-lived as it is higher than its true intrinsic value.
Investors are likely to benefit from precise identification of toxic stocks with the help of an investing strategy called short selling. This strategy allows investors to sell a stock first and then buy it when price falls.
While short selling excels in bear markets, it typically loses money in bull markets.
So accurately identifying toxic stocks and abandoning or short selling those at the right time is the key to safeguard your portfolio from big losses.

Screening Criteria
Here is a winning strategy that will help you to identify overpriced toxic stocks:
Most recent Debt/Equity Ratio greater than the median industry average: High debt/equity ratio implies high leverage. High leverage indicates a huge level of repayment that the company has to make in connection with the debt amount.
P/E using 12-month forward EPS estimate greater than 50: A very high forward P/E implies that a stock is highly overvalued.
% Change in F (1) and F (2) Estimate (12 Weeks) less than 0: Negative EPS estimate revision for this and the next fiscal year during the past 12 weeks points to analysts’ pessimism.

Here is a toxic stock that showed up on the screen based on this formula:

Headquartered in New York, Etsy, Inc. (ETSY:NASDAQ) offers e-commerce services. It provides online and offline marketplaces to buy and sell goods. Over the past 30 days, the Zacks Consensus Estimate for next-year earnings has moved south by 20 cents per share.

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POPULAR NEWS

CNH Industrial (NYSE:CNHI) Use Of Debt Could Be Considered Risky

CNH Industrial (NYSE:CNHI) Use Of Debt Could Be Considered Risky

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EDITOR'S PICK

Indian Hoteliers Test Clout in Lawsuits Against Big Chains

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Lyons Magnus Expands Product Recall by Nearly 400 Products

We Think Alcoa (NYSE:AA) Can Stay On Top Of Its Debt

Philip Morris International Inc. stock falls Friday, underperforms market

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