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, and profits evaporate. All of 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. But here we're seeking companies that have virtually 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 appear to be headed six feet under based on their having garnered no more than the lowest one-star rating.

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, while those between 2.70 and 2.99 are "yellow flags," and those between 1.80 and 2.70 have a good chance of going bankrupt within two years. Finally, the companies with scores below 1.80 are waiting for the cryptkeeper.

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 whether these companies are headed for their burial, so don't short them based on their appearance here. Moreover, some companies, such as 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 Growth Properties, for example, which filed one of the largest bankruptcies in commercial real estate last month, appeared here back in December.

Back from the grave
Although the early days of the swine flu outbreak made it seem as if we were about to live out a chapter of a Michael Crichton novel, it seems the threat of a pandemic has fallen by the wayside. The virus looks no worse than a typical seasonal flu scare. At least this time around. Health officials say it could come back with a vengeance.

Vaccine maker Novavax got a big boost from the crisis, though, based on the thought that we'd need to stockpile vaccines to inoculate the public. Luminex (NASDAQ:LMNX) and Inverness Medical Innovations (NYSE:IMA) also bounded higher.

Yet as CAPS All-Star TSIF notes, the betting on Novavax was simply speculation, because the company currently has no products available that could address the contagions.

Novavax is working on vaccines for various infectious diseases, primarily in [India, where] regulations might be [looser]. This current epidemic is linked to the "swine flu" (no swine necessary) and not the bird flu that gave companies such as Novavax the funding to get started. Novavax currently has no products to address any of the [infectious] diseases and their share price spike is clearly speculative. Its "virus-like particle platform technology" is being applied to the H5N1 and other avian influenza, human seasonal influenza and respiratory [viruses].

Of course, the hope is that Novavax's speeded-up development process would have a vaccine on the market faster than the typical process for manufacturing them would.

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.