This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

$5 Stocks Least Likely to Declare Bankruptcy

BOSTON ( TheStreet) -- Companies that trade for less than $5 a share are typically viewed as speculative, though they're not all in the same shape.

The Altman Z-score, a formula developed by New York University professor Edward Altman in 1968, measures companies' financial health to predict which may enter bankruptcy within two years. The gauge was found to be 80% to 90% accurate on samples of distressed firms one year prior to bankruptcy by examining working capital, retained earnings and other measures, according to Altman's study.

A company's Altman Z-score places it in one of three classifications. Companies with an Altman Z-score of at least 3 are considered "safe," while those with 1.8 or less are "distressed." Those in between are in a gray zone. Some stocks trading under $5 have a negative score.

TheStreet ranked companies on the New York Stock Exchange and Nasdaq trading at less than $5 with a minimum $5 million market value and the strongest Altman Z-score. Each company's current ratio is given, which helps measure the ability to meet short-term obligations.


5. China Education Alliance (CEU) is a Chinese online education and training company. The stock had traded above $5 until May, when China Education reported a fiscal fourth-quarter profit of 12 cents a share on revenue of $8.6 million, which was below the consensus target for earnings of 15 cents a share on $11 million in revenue. Still, China Education has seen revenue increase sharply in the past three years.

Altman Z-score: 62.21

Closing Price: $3.97 (Aug. 4)

2010 Total Return: -35.1%

Current Ratio: 42.04. A current ratio well above 1 indicates that China Education would have no difficulty meeting its short-term obligations with current assets if those liabilities came due.

Consensus: Two research firms, Rodman & Renshaw and Hudson Securities, have "buy" ratings on the company and an average price target of $8.50. No other analyst covers the stock.

1 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
VIFL $0.00 0.00%
PURE $0.73 1.32%
URZ $0.00 0.00%
RNN $0.60 -0.98%
AAPL $126.44 -0.13%

Markets

DOW 17,730.11 -27.80 -0.16%
S&P 500 2,076.78 -0.64 -0.03%
NASDAQ 5,009.2140 -3.9090 -0.08%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs