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. That does happen, 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 Motley Fool CAPS community, where 130,000 members give the thumbs-up or thumbs-down to about 5,300 stocks. We've unearthed a handful of stocks that look like they might be down, based on their having garnered no more than the lowest one-star rating.

Then we'll put them through 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 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 for  bankruptcy protection within two years, and those with scores below 1.80 are even worse off.

Here's today's list.


CAPS Rating

Current Ratio

Acid-Test Ratio

Altman Z-Score

Recent Price

American Campus Communities (NYSE:ACC)






Ballard Power (NASDAQ:BLDP)






Career Education (NASDAQ:CECO)






Embarq (NYSE:EQ)






NetLogic Microsystems (NASDAQ:NETL)






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. Yet our primary screen remains those stocks that CAPS investors have given one star, meaning they could be destined to seriously underperform the market. Las Vegas casino operator Riviera Holdings, included in a deathbed story from May 2008, recently missed an interest payment due to lenders and said it might have to file for bankruptcy eventually.

A legal eagle
On the surface, a few of these companies don't necessarily look that bad, considering their ratios still appear healthy. All of NetLogic Microsystems' metrics seem to be keeping it healthy, while traditional land-line provider Embarq, which was spun off from Sprint Nextel (NYSE:S) in 2006, is waiting for its acquisition by CenturyTel (NYSE:CTL) to be completed sometime in the second quarter. Embarq's profits were flat in the first quarter, as revenues fell 6% on a near-10% decline in access lines.

American Campus Communities, though, is like the platypus of the stock market. Is it a real estate play, as suggested in its status as a real estate investment trust, or an education stock that ought to do well in a down economy? This builder of unique campus dormitories would seem to have a chance to capitalize on its recent acquisitions, for which occupancy rates are lower than for its own properties (88% vs. 96%), but it carries a burdensome debt load. Cash on hand equals $48 million while the company struggles with more than $1.28 billion in debt. It has more than $220 million worth of debt maturing this year, unless it exercises one of its two payment extensions.

CAPS All-Star member muirmm thinks American Campus Communities will face financial straits if its growth plans don't work out just right.

Since it owns a lot of real estate bought recently at high prices and carries significant debt, this company will be in a tight spot if it loses very many tenants. With the economy still tightening, [American Campus] is likely to encounter a rough patch in the near future.

Rattling the cage
Are these companies doomed? 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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.