4-Star Stocks Poised to Pop: Rackspace Hosting


Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, hosting and cloud-computing specialist Rackspace Hosting (NYS: RAX) has earned a respected four-star ranking.

With that in mind, let's take a closer look at Rackspace's business and see what CAPS investors are saying about the stock right now.

Rackspace facts

Headquarters (Founded)

San Antonio (1998)

Market Cap

$5.3 billion


Internet software and services

Trailing-12-Month Revenue

$831.75 million


CEO A. Lanham Napier (since November 2006)

Acting CFO Karl Pichler (since April 2011)

Return on Equity (Average, Past 3 Years)



$133.9 million / $134.9 million


Amazon.com (NAS: AMZN)

Google (NAS: GOOG)


Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 94% of the 740 members who have rated Rackspace believe the stock will outperform the S&P 500 going forward. These bulls include All-Star Lituus, who is ranked in the top 10% of our community, and Hodzy.

This past spring, Lituus nicely summed up the Rackspace bull case:

The growth projections for this space over the next 5 years are phenomenal. I also like RAX because they have been able to maintain their margins while massively ramping their revenues. Also, wouldn't be surprised if they get bought out.

Over the next five years, in fact, Rackspace is expected to grow its bottom line at a brisk rate of 36% annually. That's faster than listed rivals like Amazon (30%), Google (19%), and IBM (12%).

CAPS member Hodzy expands on the growth opportunity:

Rackspace Hosting is part of a growing industry of cloud computing. The traditional view has been to hire a large IT group in order to manage a few servers of information. With Rackspace, you can rent storage reducing overhead cost. Rackspace is known for its outstanding customer service and fast response time. The company is growing at a steady rate and gaining more market share.

What do you think about Rackspace, or any other stock for that matter? If you want to retire rich, you need to put together the best portfolio you can. Owning exceptional stocks is a surefire way to secure your financial future, and on Motley Fool CAPS, thousands of investors are working every day to find them. CAPS is 100% free, so get started!

At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Rackspace, Amazon, and Google. The Fool owns shares of IBM and Google. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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