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. Here, though, 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 having garnered no more than the lowest one-star rating.

Then 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, those between 2.70 and 2.99 are “yellow flags,” those 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, are these companies only mostly dead, or have they already given up the ghost?

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 our primary screen remains those stocks that CAPS investors have given one-star status to, meaning they are possibly destined to seriously underperform the market. General Motors (NYSE:GM), for example, has managed to stave off the B-word so far, but its Swedish Saab unit was recently forced into bankruptcy protection.

A legal eagle
Give me Waylon Jennings, Merle Haggard, Johnny Cash, and even a dash of Steve Earle, but you can keep the syrupy sameness of most of today's country music. It may just be the banality of the mainstream strand of the business that is doing in Gaylord Entertainment, the operator of the historic, 80-year-old country music venue, The Grand Ole Opry.

Despite giving in to activist shareholders who sought more board representation, it seems the Nashville-based convention resort operator has only bought a little more time rather than fixing the problems, though the maneuvers make a buyout offer more feasible.

In addition to those board matters, Gaylord also increased the percentage of ownership that would trigger a "poison pill" provision and offered exemptions for a fully financed take-private offer. The bid must be at least 25% greater than Gaylord's share price at the time of the offer and 25% or more higher than the stock's 200-day moving average at the time. That would give it a value of around $25 at current prices.

CAPS member TSIF remains unimpressed and thinks even additional Elvis sightings won't help this business regain its twang:

Recent Capitulation to activist and changes to Board do not change the financials of this company. They are bleeding cash, have very high debt, and are in a business that stinks right now and will for quite some time, unless there are fresh Elvis sitings down there at the Grand 'ol Oprayland!

It's not just country music that's feeling the pinch these days; it’s all entertainment destinations. When even the Las Vegas strip is hurting, how can Dollywood not feel the effects? Even the famed Las Vegas Sands (NYSE:LVS) is teetering on the edge, despite management protestations to the contrary. It just might make for a good skit on Gaylord's Hee Haw.

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.