Meaning – The term penalty box, refers to a temporary position of low esteem usually awarded for a perceived failure or misdeed.
Frequently, a firm that does something illegal or unethical will land in the penalty box because of the loss of trust. However, companies can also end up in the penalty box for missing earnings expectations, failed product launches, or anything else that undermines confidence.
A company in the penalty box is often one that has received some bad news, ensuring poor returns for its stock in the future.
Stocks that are in the penalty box may act the same way. Stocks in the penalty box might not be able to gain much. However, they may be able to stay afloat in the market and avoid significant losses.
Example of usage – “An example of the term penalty box, is a drug company with a key drug that doesn’t get the Food and Drug Administration (FDA) approval. These types of companies will often stay in the penalty box for a long time.”