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. 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 sick bay
Don't assume that all such companies are goners. Some will barely cling to life, while others will make a full recovery. It happens, but here we're seeking companies that have all but given up the ghost.

For help, we'll turn to the 135,000-plus members in our Motley Fool CAPS community, where members give the thumbs-up or thumbs-down to about 5,300 stocks. We've unearthed a handful of companies that look like they might be in trouble, based on their one-star ratings, but we'll head over to CAPS to measure some members' opinions on a company's prospects.

Then we'll run some quick tests for liquidity. The current ratio and the 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 that might be in danger of filing for bankruptcy protection. Companies scoring 3.00 and above are considered safe, those between 2.70 and 2.99 are "yellow flags," those between 1.80 and 2.70 have a good chance of filing within two years, and those with scores below 1.80 are at the most risk.

Here's today's list. The question is, with our primary screen being those stocks that CAPS investors have rated one star, are these companies only mostly dead?

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

We obviously don't know where these companies are headed, 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. 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
Ever since they emerged from bankruptcy, auto parts manufacturer Tenneco has been counting on both General Motors and Chrysler to help foster sales of its emission and ride-control products. However, despite a small but noted increase in interest for new cars, sales remain anemic. The sales that automakers are generating today, especially in the "cash for clunkers" program, could simply be stealing sales they would have made down the road. While Ford (NYSE:F) looks like it might have a hit lineup of vehicles, unemployment remains well above 9%, and a surprise jump in jobless claims means the economy could remain stagnant for quite some time. With TRW Automotive (NYSE:TRW) recently announcing it would offer 14 million shares in a public offering, analysts suspect that if that's well-received, Tenneco would follow suit with its own offering, which would dilute current shareholders.

The auto industry and those supplying it stand on weak ground, and even though the clunkers program revved up everyone's engines for a bit, investors remain leery of what the future holds for Tenneco. Highly rated CAPS All-Star BigFatBEAR has dismal expectations. 

Increasing debt, debt 2X market cap, negative equity, high cost of revenue. Beware that pesky 3.6 beta, and the -10 EPS. Oh, and the insane run-up from lows. This stock screams SELL! about as loudly as [Palm].

Rattling the cage
Are these companies doomed? Or will they come back? 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 what you think.