5 Deathbed Stocks?

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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. 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 sick bay
Don't assume that all such companies are goners. Some will cling to life, while others will make a full recovery. Here, however, 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 CAPS community, where members give the thumbs-up or thumbs-down to some 5,300 stocks. First, we unearthed a handful of stocks that look like they might be headed six feet under, based on their one-star ratings.

Now, we'll palpate their pulses 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 could be waiting.

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

Stock	CAPS Rating (out of 5)	Current Ratio	Acid-Test Ratio	Altman Z-Score	Recent Price
Albany International (NYSE: AIN)	*	2.6	1.5	1.63	$19.13
Brookfield Homes (NYSE: BHS)	*	5.5	0.1	1.24	$7.65
British Sky Broadcasting (NYSE: BSY)	*	0.9	0.6	2.02	$36.26
CA (NYSE: CA)	*	1.1	1.0	2.09	$22.24
Reddy Ice (NYSE: FRZ)	*	2.1	1.5	0.53	$6.12

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. Like the mythological Charon, who conducted souls across the River Styx to the netherworld, we'll use the CAPS community as our guide to determine whether these stocks are destined to seriously underperform the market.

Given that, let's look at a company that has never carried higher than a two-star CAPS rating.

Whistling past the graveyard
Some companies have trouble shedding the image of past problems. IT management software company CA has always carried the low-rating stigma from CAPS members. One, longtimelong, expressed his negative belief in this company earlier this year:

This company is dead. Cutting jobs in the US and hiring abroad to increase profits. No innovation. No flagship product. Even the company name CA was a horrible choice (abbreviation for California). [Try doing] a Google search on the company name and see what you get (garbage). Unfortunately, there aren't any pieces to this company that someone would want to buy or investors could get some money via being acquired.

But the new management that was brought in to separate CA from its legal troubles has done just that: CA has trounced analyst expectations for five straight quarters. But with its turnaround-specialist CEO now heading out the door, can it still perform?

At 13 times the next 12 months' earnings estimates, CA is comparatively valued to competitors BMC Software (NYSE: BMC) and Novell (Nasdaq: NOVL). In its fiscal first quarter, CA saw revenue jump 4% and net income grow 6%, excluding variable foreign exchange rates. It looks like the issues that plagued it in the past have been buried there.

CAPS member AlexFoley seems ultimately correct in his assessment of the IT specialist from last year, noting that CA's "executive leadership team is finally starting to get a hold of the situation and are setting a new standard for the corpoarte culture, one which rids the company of the ghosts in its past."

I agree. CA, I'd say, won't find itself at Death's door anytime soon.

Rattling the cage
Are the other companies doomed to drag their investors into an underworld of underperformance? Or will they be resurrected to stalk the markets once again? Will CA finish its long climb back? Check out Motley Fool CAPS, where you can 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 these or any other stocks have the Grim Reaper at the door.