🗞 Fallen Angel or Falling Knife?

Happy Sunday! 👋 

Today we’re sifting through 5 stocks in major drawdowns to determine whether or not they should qualify as a “Fallen Angel” or a “Falling Knife”.

Let’s dive in!

Featured Story

Fallen Angel or Falling Knife?

There’s no technical definition for a “fallen angel” versus a “falling knife”, but the concept is simple enough.

“Fallen Angel” refers to companies where the stock price has collapsed but the business quality still remains in tact. Whereas “falling knife” refers to shares that have collapsed but could still have further to go.

In other words, we’re looking to determine whether the problems facing a business are temporary or structural. Or, maybe even in certain instances, just an illusion created by fearful investors.

As a quick reminder, Fiscal.ai is a data provider. We aren’t buying or selling any securities discussed in this newsletter. Our goal, instead, is to present you with valuable data and context to come to your own conclusions.

With that out of the way, let’s look through the list:

1. Accenture

• Current Drawdown: -67%

Accenture is the largest pure play IT consulting firm in the world.

Large organizations hire Accenture to plan, build, integrate, and manage new technologies/business strategies. These include projects like company-wide ERP implementations, launching and maintaining applications, functioning as an outsourced IT department, and much more.

These contracts are typically massive multi-year deals (>$100 million) that require Accenture to provide ongoing resources, talent, and expertise to manage the entire project end-to-end. For 20+ years, this was a remarkably consistent business.

However, the rise of generative AI has led investors to question Accenture’s staying power. At the moment, there seems to be a widespread narrative that much of the work companies hire Accenture for (especially the baseline coding component) can be replaced by AI. And last quarter, when the company reported a 2% year-over-year decline in new bookings, it seemed like proof that investors’ concerns were coming to fruition.

Accenture’s management team disagrees. Given the size of Accenture’s contracts, timing matters. That’s why “New Bookings” is historically such a lumpy metric, and this quarter’s stumbles specifically were unrelated to AI according to CEO Julie Sweet:

• EV/EBIT: 7.9x

2. Copart

• Current Drawdown: -53%

Copart is the largest salvage vehicle remarketer in the world.

When a car is deemed a “total loss”, Copart is the first call an auto insurance company makes. They pick up the vehicle, bring it to one of its 200+ owned salvage yards, and list it on their proprietary online auction platform for bidding from 750,000+ potential buyers (dismantlers, rebuilders, scrap dealers, etc). Copart collects commissions and fees for each transaction.

When most people hear “junkyards” or “salvage yards”, they probably don’t think it’s much a business, but Copart has proven it can be. Given that Copart doesn’t actually own the vehicles, and instead just markets them to their buyer network, the business is surprisingly capital light. This has enabled Copart to generate 20%+ ROIC over the last two decades.

However, for the first time in a decade, the company is expected to report a revenue decline this year. This appears to be happening for three reasons:

1) Progressive — the largest auto insurance company in the US — is shifting its totaled vehicle volumes to a more balanced, multi-carrier approach. In other words, they’re giving more salvage vehicles to Copart’s largest competitor IAA.

2) Total industry-wide repair claims dropped 10% this year. Part of this is due to rising insurance premiums/deductibles. Cost-conscious drivers are being forced to skip claims altogether and pay out-of-pocket or just drive damaged cars.

3) Fewer catastrophe-related claims. So far, 2026 has been a calmer year for natural disasters. This has contributed to a good chunk of the decline in claims.

Fewer processed vehicles means less revenue for Copart, and investors are worrying that these headwinds could persists. To add fuel to the fire, last week, CEO Jeff Liaw stepped down to be replaced by former CEO Jay Adair.

However, if these headwinds are structural, management’s capital allocation certainly isn’t showing it. Last quarter, Copart spent more on share repurchases than any quarter in their history. 

• EV/EBIT: 13.97x

3. Intuit

• Current Drawdown: -56.3%

Intuit is the 2nd worst-performing stock in the S&P 500 this year.

The parent company behind financial management products like TurboTax, Quickbooks, and Credit Karma has been subject to major AI disruption fears among investors, especially concerning TurboTax for individuals.

Leading AI companies like Anthropic and Perplexity have made significant moves into the tax sector with AI agents designed to help individuals gather documents and prepare tax returns.

Following these announcements, Intuit reported a 2% decline in total online units, resulting in an estimated market share loss of 1%. Management was very explicit about where these market share declines stemmed from:

If you believe management here, and believe they can win customers back with an improved pricing strategy, this could certainly fall into the “Fallen Angel” camp as shares are currently trading at their lowest valuation in more than a decade.

• EV/EBIT: 13.12x

4. Planet Fitness

• Current Drawdown: -52.9%

Planet Fitness is one of the largest and fastest-growing low-cost fitness franchises in the world.

Since 2012, the company has expanded from 606 locations globally to nearly 3,000 today. Over that time, they’ve also increased the average number of members per gym and the average membership price. That trifecta of growth (store count, members, and revenue per member) have combined to generate a ~17% annual revenue CAGR for Planet Fitness over the last decade.

But on May 6th, shares plummeted almost 30% in a single-day due to a massive guidance cut from management during Q1 earnings. The company reported their lowest Q1 new member additions in 5 years, forcing management to reduce their revenue growth guidance from 4%-5% for the full year to just 1%.

Management attributed this slower than expected growth for their busiest season to marketing misalignment and “severe winter weather”.

While gyms are often seen as a hyper-competitive business, Planet Fitness has proven that its model can work. Earnings per share has increased by 28% annually since 2014, and shares were doubling the returns of the S&P 500 prior to the recent collapse.

If you think Planet Fitness can crank up their new member growth again with more aligned messaging, this could be a great entry opportunity as shares are currently trading at their cheapest multiple since 2017.

• EV/EBIT: 16x

5. CoStar Group

• Current Drawdown: -70%

Up until 2025, CoStar Group was an absolute market darling. In fact, from their 1998 IPO to August of 2025, CoStar Group was more than a 100-bagger for investors.

Shares have since collapsed 70%.

CoStar Group dominates the industry for commercial real estate data. Occupancy rates, floor plans, sale and lease values, you name it, CoStar likely tracks it. This data isn’t always easy to find either. CoStar employs thousands of field researchers and massive call centers to manually cross-examine property managers, audit physical assets, and call listing brokers to pull off-market transaction data.

If you work in the commercial real estate space (agents/brokers/investors), paying the $1,000 or more a month to subscribe to CoStar’s data is basically a requirement. This was, and still is, a fantastic business with proven pricing power.

However, in 2021, CoStar bought Homes.com for $156 million. This marked the launch of their push into the single-family real estate market, and away from their core business in commercial. CoStar wanted to challenge Zillow’s dominance in the industry and to do that they started pouring billions into marketing.

This culminated in CoStar Group reporting their year GAAP operating losses in more than 20 years.

CoStar’s collapse has drawn the attention of several notable activist investors, including D.E. Shaw and Third Point. In April of 2025, Third Point even got seats on the board and have since pushed for major cost cuts and an accelerated share repurchase program.

While investors can no longer value CoStar on a trailing earnings basis given the flip to negative GAAP profits, CoStar is trading at their lowest enterprise value to gross profit multiple since the great financial crisis.

• EV/Gross Profit: 4.5x

That’s all for this week. 

If you have any companies that belong on this list or any questions about fiscal.ai, feel free to reply to this email!