This week, I did a little experiment. I reversed many of the data feeds I use to seek out relatively strong companies and instead sought out the worst companies in the market. Because I want to know who is going out of business…

It took exactly 38 seconds to find the three rock-bottom worst publicly traded companies out there.

I started with a scan of negative price-to-earnings (P/E) so I can be assured they don’t make money.

And I looked at the price-to-sales (P/S) ratio. For this experiment, I wanted ratios well into the double digits to gauge what any remaining investors think regarding valuations.

Then we targeted the balance sheet. Let’s find something terrible. Something with a Piotroski Score under 3 and a Z-Score (bankruptcy risk) under 1.5.

These would be spectacularly bad metrics, and for good reason: I want to make sure that, when these firms go under in 2023 or 2024, there is an implosion that we can see from miles away. I mean, it has to be so bad that not even private equity would bother with these companies. So, let’s a recap.

  • P/E Ratio: Negative
  • P/S Ratio: Over 10 (Even 20)
  • F Score: 3 or Less
  • Z Score: 1.5 or Less

And that brings us to three stocks…

Don’t Buy These Stocks

Virgin Galactic Holdings Inc. (NYSE: SPCE)
Sir Richard Branson was able to make a lot of money on his Virgin brand. And plenty of other executives sold SPCE stock over the last five years. Since 2017, executives have sold $1.6 billion in SPCE stock. They’ve only bought about $100 million in that time.

Virgin Galactic is in the business of space tourism. But the stock continues to crater from its all-time highs. In 2021, shares popped above $55 per share. Today shares trade for under $5.

There’s a reason for this… The company’s numbers are terrible! Virgin Galactic has an F score of 2, a negative Z score, and a P/S ratio of over 769 times.

To justify its price today, the company would need to provide 100% of its revenue to investors for the next 750 years – seven and a half centuries. You’ll probably walk on the Moon before you can justify owning this stock ever again.

Nikola Corp. (Nasdaq: NKLA)
Remember this so-called Tesla-killing electric vehicle company? It’s the worse. It might be a plague on investors. Anyone still holding this thing should get free government healthcare – because they also perceive both crappy ideas as a value.

Remember… Nikola’s Founder, Trevor Milton, was found guilty in October of fraud — he artificially pumped up his stock and engaged in wire fraud. He’ll likely be sentenced to up to 25 years in prison in January.

Nikola’s stock looks like a company heading toward delisting and bankruptcy. Its balance sheet is a mess, with an F score of 2 and a Z score of negative 2.77%. The price-to-sales ratio is now at 22.4x. Owning this stock is the equivalent of putting a raging grease fire on your mantelpiece.

Odyssey Marine Exploration Inc. (Nasdaq: OMEX)
So, hey, kids. Imagine if you could own a stock with the insane and improbable moonshot of Virgin Galactic combined with the financial instability of Nikola.

Great news: Odyssey Marine Exploration.

Because why go to space when you can explore the cold-dark lunar feel of the ocean’s bottom? And with this stock, your money is also likely heading to Davy Jones’ locker.

The company operates in deep-sea exploration, focusing on procuring minerals under the oceans. This company started in the exploration business of shipwrecks, but then it found an excellent narrative for a public market with no ability to control reckless speculation. Why wouldn’t they exploit the utter stupidity of “YOLO” investors in 2020-2021?

OMEX has an F score of 3 and a Z score of -35.7. Simply put, this company is one creditor away from a serious problem. Its P/S ratio is 40x, meaning I’d be in my 80s by the time this stock justified its current price.

The only reason that I can think of to invest in these companies is if you’re heading for divorce and you don’t want your ex-spouse to have the money. Aside from that… save your cash. Or better yet, bet against them next year.

— Garrett Baldwin

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Source: Money Morning