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, whereas others will make a fully 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 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 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 a score below 1.80 means 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. Pacific Ethanol, for example, reported that a number of its subsidiaries filed for bankruptcy while it appeared here last June.

Back from the grave
Despite Crocs' stock having doubled so far this year (and it was pretty much a quadruple hit before giving back half its gains), it seems to be little more than rank speculation that this footwear maker can be anything better than a fad like Heelys (NASDAQ:HLYS).

Revenues are still in a sharp decline, and losses, while less than expected, are no pair of ruby slippers that'll take you home again. Perhaps they're popular still amongst kids, but with employment trends heading the wrong way, Crocs is going to have a difficult time making sales. Uniform maker Cintas (NASDAQ:CTAS), for example, faces a similar macroeconomic crunch as restaurants, hospitals, and other industries where its apparel would typically be a requirement is slipping. Crocs, which still might be attractive to certain segments of the economy -- hospital staffs seem to love 'em! -- won't gain any traction.

In fact, CAPS member Buffetisbest just doesn't see the plastic molded shoe as being a necessity any longer.

Not many people like crocs any more. Although they might be comfortable, they are nowhere near as popular and as necessary to buy as they were a few years ago.

Or, as top-rated All-Star member Jognils wonders, how did "garden clogs" ever become fashionable?

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 Repear's at the door.