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. 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 full 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 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 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 primary screen being those stocks that CAPS investors have given one-star status to, 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
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)	*	1.6	1.0	1.21	$3.49
Martha Stewart Living Omnimedia (NYSE: MSO)	*	1.7	1.4	2.00	$5.99

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

We obviously don't know if 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 like the mythological figure of Charon conducting 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.

Whistling past the graveyard
Like CAPS All-Star kristm, many investors see the end of the Martha Stewart-Kmart collaboration as a pretty bad thing. The concern over losing the Sears Holdings (Nasdaq: SHLD) division shows just how good the pairing has been for the company.

There's still a clothing deal with Macy's, but the K-Mart arrangement is the majority of their merchandising profits. Take away the branded merchandise and all you have left is essentially a magazine company, a satellite radio channel, and a handful of TV shows.

As kristm further points out, since the former arrangement was what helped keep Kmart afloat, you have to wonder if it's more tragic for Sears than for Martha Stewart Living Omnimedia. It hasn't been able to post an increase in sales in years, while at least Martha Stewart Living Omnimedia has moved on to put a handful of products in Wal-Mart Stores (NYSE: WMT) and has signed on to collaborate with Home Depot (NYSE: HD). The companies' publishing empire is perhaps a weak link because of industry difficulties -- Conde Nast, for example, just ended its high-end cooking magazine Gourmet because of a lack of advertising -- but if she can continue to ink merchandise deals and expand her Wal-Mart presence she ought to be able to keep the wolf from the door.

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.