5 Deathbed Stocks?

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. Revenue dries 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 full recovery. 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 130,000-strong Motley Fool CAPS community, 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 rock-bottom one-star CAPS ratings.

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. 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 have a nearly certain appointment with the cryptkeeper.

Here's today's list. The question is, are these companies only mostly dead, or have they already given up the ghost?

Stock	CAPS Rating	Current Ratio	Acid-Test Ratio	Altman Z-Score	Recent Price
Data Domain (Nasdaq: DDUP  )	*	4.0	3.7	6.49	$11.45
FUJIFILM (Nasdaq: FUJI  )	*	2.4	1.3	2.76	$21.49
Regeneron Pharmaceuticals (Nasdaq: REGN  )	*	6.2	6.1	2.03	$14.45
Speedway Motorsports (NYSE: TRK  )	*	0.9	0.7	1.43	$11.39
Toll Brothers (NYSE: TOL  )	*	5.8	1.7	2.55	$18.45

Sources: Motley Fool CAPS; Capital IQ, a division of Standard & Poor's.

We obviously don't know whether these companies are headed six feet under, so don't short them based on their appearance here. Moreover, some companies like software makers and financials don't neatly fit into the Altman Z-Score scale. Yet our primary screen remains those stocks to which CAPS investors have given one-star status, signifying that they may be destined to seriously underperform the market. July's deathbed candidate, auto parts maker Lear, recently said that it may still have to file for bankruptcy, despite winning concessions from lenders.

Haunted mansions
Ben Bernanke says the Fed wants to pump $1.2 trillion into the economy as a way to further lower mortgage rates. With rates this low, you'll be forgiven for wondering why they're bothering to charge any mortgage interest at all. After all, rates have already fallen below 5% for a 30-year fixed, the lowest level since January.

High interest rates aren't the bane of Toll Brothers, Centex (NYSE: CTX  ) , and KB Homes (NYSE: KBH  ) ; they're suffering far more from a glut of inventory on the market. Although the surprise 22% jump in new home construction in February gave homebuilder stocks a boost, building a home doesn't equate to selling one. The most current data from January showed that new-home sales sank 50%, the sixth monthly decline in a row, with the supply of new homes at the current sales rate on the market rising to more than 13 months.

If Toll Brothers and the other builders want to build even more homes, deluding themselves into thinking their market has finally hit bottom, that doesn't mean investors need to follow them. As CAPS member assistryan notes, Toll is famous for its McMansion-style of building, on the opposite end of the market from the sort of homes that will likely lead the recovery:

The housing industry still has a long way to fall. Tolls' wheel house is mid to upper end mcmansions. Tighter credit is hitting this price range the worst. As the market stabilizes the lower end will recover first, follow at least 2-3 years later by the upper end market. In addition the majority of the markets around the country are way over built. It is still going to take years to clean up inventory levels.

Rattling the cage
Are these companies doomed to drag their investors into an underworld of underperformance? Or will they be resurrected to stalk the markets once again? It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. Sign up today, absolutely free, and let us know whether you think the Grim Reaper's at the door.