Stocks That Are Raising the Bar

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No one knows a company better than those who run it. That's why investors will often watch for when insiders are buying company stock or whether companies are buying back their own shares. These can be bullish signs for a company.

Raising earnings or sales guidance for the coming quarter or year is also a bullish sign, as over time earnings growth follows sales growth. When a company predicts greater sales profits, we expect its stock price to soon follow.

Sometimes, though, things don't work out as planned, so we'll pair up the increased outlook with the sentiments of more than 180,000 members of Motley Fool CAPS. If the best and brightest stock pickers think a company's long-term potential is outstanding, coupled with the company's own improved sentiment, maybe then investors should take notice, too.

Here are two stocks that have recently raised guidance..

Stock

CAPS Rating (out of 5)

Previous Estimate

New Estimate

Period

Ocz Technology (NYS: OCZ) ***$320 million-$350 million$360 million-$375 millionFY 12
lululemon athletica (NAS: LULU) **$0.40-$0.42$0.47-$0.49Q4 11

Don't blindly buy into their heady outlook -- you still need to do some research. Use the announcement as a jumping-off point for additional research.

Raising their voices
Sometimes businesses make their chances, and other times they take them. Only the best can profit regardless of how the opportunities arise, and Ocz Technology is proving it can do just that. Last year it abandoned the DRAM market and bought solid-state drive controller design company Indilinx in a bid to continue upping the heat on peers like STEC (NAS: STEC) . The enterprise SSD market has shown tremendous growth, but as STEC realized when its share price cratered after major customer EMC slowed its orders, lumpy growth can come especially for companies overly reliant on large customers. Ocz then purchased the systems-on-a-chip design team from PLX Technology and was handed an additional opportunity to gain ground on both because of the flooding situation in Thailand.

That seems to be paying off handsomely, as it once again raised its guidance in the face of the hard disk drive shortage driving customers to its products. It previously said it expected sales to come in at the high end because of shortages, but it seems to have had them coming in droves.

I had rated Ocz to outperform the market after its last guidance upgrade, and the latest results bear out that confidence. Add the drive maker to your watchlist to keep abreast of developments, and tell us on the Ocz Technology CAPS page whether you think it will maintain its lead after the region dries out.

One pant leg at a time
Luxury retailers like Coach and Tiffany have relied on international markets to supplement if not lead sales growth, but yoga-attire maker lululemon athletica has thus far relied almost solely on revenues derived from North America, though its online platform does cater to international customers.

It's a strategy that has worked well for the clothing retailer but makes it feel like it has left some money on the table. Yet it also points to where the next major avenue for growth lies should it chose to take that road.

In addition to raising earnings guidance, lululemon boosted expectations for same-store sales, saying they're expected to increase by a low- to mid-20s percentage range for the fourth quarter, well ahead of management's original forecast of increases in the low to mid-teens.

Whereas Tiffany reported faltering sales, CAPS member pchop123 might see lululemon as more akin to Coach, which has enjoyed steady growth regardless of conditions: "A luxury brand that people seem willing to spend on, in good economies and bad ones. A true Rule Breaker."

Add lululemon athletica to your watchlist to be notified as news and developments happen.

Raise your sights
These stocks may have raised expectations, but The Motley Fool found two small-cap stocks that have the potential to deliver multibagger returns based on solid government contracts. You can get instant access to these companies for free! But it's only for a limited time, so hurry.

At the time this article was published Fool contributorRich Dupreyholds no position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of lululemon athletica, Coach, and Western Digital.Motley Fool newsletter serviceshave recommended buying shares of lululemon athletica and Coach. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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