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Below is a list of today's twenty-five most distressed stocks (according to their Altman Z-Score or Z''-Score, respectively) with a share price of $5 or higher. For details on how this ranking list is compiled, please click here.
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DEST - Destination Maternity
Destination Maternity is not wildly overpriced but is no bargain with declining revenues the last few years. They have swung to positive earnings which they did not have for a few years but it is my opinion that this is more than priced in at these levels. My biggest assumption is that pregnancies will be in decline with a continued weak economy. One could argue that because people are more inclined to not go out and spend there is an increased chance of unplanned pregnancies. Even if that were the case, I would expect these new mothers to be thriftier with their maternity clothes than they would have been during more prosperous times.
The share price recently retraced about 50% from its decline from the high in 2006 to its low in 2009. Volatility has increased recently as well. There was a double top on the daily chart in Apr/May. After this decline there was a sharp rally that sold off about as fast as it went up. We are now at a support level. I would like to see a rise to around 29 or 30 to short it. This would get us up to the trendline from the May and June peaks. If it were to break the support and take out the June 24 low, an agressive trader could short it there with a stop around $26.
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"One could argue that because people are more inclined to not go out and spend there is an increased chance of unplanned pregnancies."
I suspect the women who are conscientious about reining in their spending are probably conscientious about family planning too, but there is an implicit distinction here. To borrow John Edwards's phrase, there seems to be sort of "two Americas" when it comes to child rearing. There's the America that buys $800 three wheeled racing strollers and the America that still uses the cheap strollers everyone had when we were kids.
DEST seems to cater more to the $800 stroller crowd, and that's the crowd that's probably more likely to rein in its spending in this sagging economy.
I was almost joking about that. I did consider it though and think I've heard of such things happening although I cannot quote any specific points in history. I like your additional analysis. Seems a pretty good one if caught at a good spot.