5 Superball Stocks
When stocks fall fast and far, they sometimes set themselves up for remarkable rebounds. The following equities suffered dramatic drops over the past week. With help from the more than 180,000 members of Motley Fool CAPS, we'll see whether any of them have the potential to bounce back.
It's been awhile, but thanks to last week's sell-off, we once again have a chance to stand beneath Mr. Market's silverware drawer in hopes of snagging a bargain. Let's meet today's contenders:
How Far From 52-Week High?
|Ebix (NAS: EBIX)||(30%)||$18.60||*****|
|Fusion-io (NYS: FIO)||(45%)||$22.95||**|
|Threshold Pharmaceuticals (NAS: THLD)||(31%)||$6.25||**|
|JDS Uniphase (NAS: JDSU)||(50%)||$11.09||**|
|Green Mountain Coffee Roasters (NAS: GMCR)||(78%)||$25.10||*|
Five super falls -- one superball
Last week was a rough one for Mr. Market, as the Dow dropped 1.5% and the S&P 500 2.5%. More than 4,900 separate companies declined in value, but few took hits as big as the five named up above -- each was literally decimated, losing 10% or more of its market cap. So what went wrong?
Let's start with the obvious: Green Mountain. The K-company posted 37% sales growth and 33% better adjusted earnings, but still missed estimates badly. Worse still, Green Mountain cut estimates for the rest of the year pretty significantly, spooking investors and costing Green Mountain nearly half its market cap.
Similar story at JDS Uniphase. The optical networking firm has posted three consecutive quarters of declining revenues. Last week, it promised shareholders a fourth. Little wonder investors are heading for the exits.
Filling out the roll call of misery, Threshold Pharma reported a $115.5 million loss, and Fusion-io a $4.7 million loss (albeit that one's still promising 75% sales growth this year, so there's still some hope there). Regardless, judging from the one- and two-star ratings being handed out to these stocks on CAPS, investors are starting to lose patience waiting for promises to turn into performance.
Indeed, they're so scared, it appears, that investors even decided to toss out baby software-maker Ebix with the dirty bathwater described above. Ebix hasn't even reported earnings yet, you see, but considering how poorly others are performing, some nervous investors decided to dump the stock ahead of tomorrow's earnings. Was that the right call?
CAPS member Beginner110 adds that in addition to what it's already done, Ebix is "Increasing earnings, cash flow, sales, at an enormously high rate. Credit rating very good for small company."
While I personally wouldn't call Ebix's projected 20% earnings growth rate "enormous," it is certainly decent. Certainly fast enough to justify the stock's lowly 10 P/E ratio. What's more, for all the criticism Ebix has garnered for being a "roll-up" artist, the truth is that this company looks cheap by just about any measure you choose to use.
Even viewed in the least favorable light possible -- subtracting the costs of acquisitions from free cash and dinging the company for the debt on its books -- Ebix looks like a 12-times ratio stock when valued on enterprise-value-to-free-cash flow. And again, at 20% growth that price looks cheap.
Foolish final thought
I'm personally sufficiently impressed by Ebix's numbers that I'm going to go right ahead and publicly recommend buying the stock on CAPS. Could be I'm wrong about this. Could be I'm right. The good news is that in just 24 hours, we'll know the answer.
How will this investment work out? Follow along and find out.
Like buying stocks with the potential to bounce back big? Read the Fool's new report andDiscover the Next Rule-Breaking Multibagger.
At the time this article was published Fool contributorRich Smithdoes not own shares of (or short) any company named above. You can find him on CAPS, publicly pontificating under the handleTMFDitty, where he's currently ranked No. 348 out of more than 180,000 members. The Fool has adisclosure policy.The Motley Fool owns shares of Fusion-io.Motley Fool newsletter serviceshave recommended buying shares of Green Mountain Coffee Roasters and Ebix.Motley Fool newsletter serviceshave recommended creating a lurking gator position in Green Mountain Coffee Roasters.Motley Fool newsletter serviceshave recommended writing naked calls on JDS Uniphase.Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.