In City speak, a ‘fallen angel’ is the term for a bond that was once highly rated but has since been downgraded to a ‘junk’ rating by credit agencies due to the parent company’s deteriorating outlook.

While the term ‘fallen angel’ originates from the credit markets, it can also be used to describe companies that were once market darlings but have since, for whatever reason, fallen from grace.

OneSavings Bank (LSE: OSB) is one such company. Until the end of June, OneSavings was championed as one of the challenger banks that would shake up the UK’s banking industry and since the company’s IPO at the beginning of 2014, shares in the bank returned more than 100% for investors. Over the same period, pre-tax profits tripled. 

However, since Brexit investors have turned their backs on the challenger bank due to concerns about the UK’s economic outlook.

Since Brexit, shares in OneSavings are down by around 41%, a decline that seems to indicate investors believe the bank’s profits will be cut in half over the next six months.

The City doesn’t hold the same view. City analysts expect the group’s earnings per share to grow by 8% this year and a further 3% for 2017. Based on these forecasts shares in the bank are trading at a forward P/E of 5.4 and a PEG ratio of 0.7. The shares also offer a dividend yield of 4.6%.

Over-reaction to a profit warning?

Publisher ST Ives (LSE: SIV) is another fallen angel that has seen its share price cut in half over the past six months. St Ives’ poor share price performance followed a profit warning from the company.

This warning came just as the group’s profits were expected to stabilise this year after nearly a decade of restructuring. Up until the warning City analysts were expecting the company to report a pre-tax profit of £37.4m for the year ending 31 July. Between 2011 and 2015 the group only reported unadjusted cumulative pre-tax profits of £49.4m. 

Nonetheless, current City figures suggest St Ives is set to report earnings per share of 17.2p for the year to 31 July 2016, indicating that the company’s shares currently trade at a forward P/E of 6.4, a rock bottom valuation that seems to discount any further disappointments.

A play on oil prices 

Amec Foster Wheeler (LSE: AMFW) is a casualty of the oil price crash. Shares in the company are down by 45% over the past 12 months. After these declines Amec’s shares are trading at a forward P/E of 8.1, City analysts expect the company’s earnings per share to fall by 19% this year before stabilising next year. Amec’s shares support a dividend yield of 5%, and the company has a relatively strong balance sheet. 

If you’re looking for a way to play a recovery in oil prices Amec could be a great pick. The company is still winning contracts in the oil sector, and two major long-term contracts in the North Sea were awarded to the group last month. Amec’s order backlog was £6.4bn at the end of March, giving just over a year’s worth of work at current run rates. Management expects revenue to register only a ‘slight’ decline for 2016 and is planning to reduce debt to £600m from the current level of £1.2bn by the end of 2017 through improved cash flow and select asset disposals. 

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.