3 Growth Stocks Worth Another Look

It's been a rough year for some of the most popular growth stocks on the market. Stocks that grew like crazy after the recession ended came crashing down to reality as performance failed to live up to the hype. Such is life with growth stocks, which can turn from bright spots to blemishes in a portfolio faster than you can say "Qwikster."

Five of the most popular companies at The Motley Fool for readers and analysts a year ago were SodaStream (NAS: SODA) , Netflix (NAS: NFLX) , Sirius XM (NAS: SIRI) , Amazon.com (NAS: AMZN) , and Green Mountain Coffee Roasters (NAS: GMCR) . All except Sirius XM have been picks for one of our newsletters, and thousands of people have made outperform predictions on these stocks in our CAPS community.

But these popular stocks have had a rough go of it lately, with SodaStream, Netflix, and Green Mountain Coffee Roasters suffering big declines in the past year. Sirius XM has also experienced a loss over the past year and is seeing revenue growth slow dramatically, but so far it's managed to hold up relatively well. The only winner in the bunch, Amazon, looks like it's still priced for perfection these days.

Sources: Yahoo! Finance and Fool.com.

From the look of the table above, Sirius XM seems fairly priced to me as long as it doesn't miss earnings estimates. I wouldn't touch Amazon with a 10-foot-pole based on its earnings multiple. But SodaStream, Netflix, and Green Mountain Coffee Roasters have been hammered so far down that I would argue there are some compelling stock buys emerging here.

A little fizz in earnings
The market seemed to give up on SodaStream after management gave weak guidance after second-quarter earnings last year. The stock dropped 41% in a single day after the announcement, and it hasn't mattered that it has crushed earnings estimates each quarter and even raised guidance after the first quarter this year. The market reacted with little more than a yawn.

In the first quarter, revenue jumped 50.2% to $87.9 million and earnings per share rose 71.4% to $0.48, not the kind of numbers you would expect from a company trading at 18.7 times trailing earnings and 12.8 times forward earnings estimates.

The company's footprint in the Americas is barely scratching the surface of its potential, and despite the stock's drop, I don't see any quit in the company's earnings momentum. I think this stock has been left for dead and that investors would be wise to scoop it up before anyone figures out what a growth story this is.

The old darling returns
My fellow Fools have loved Netflix for years, and from my first days at the Fool, I shouted loudly that I thought the stock was too expensive to own. Over the last year, shorting Netflix would have been the right move, but it's time to reconsider that position after the stock's fall.

The problems started for Netflix after a series of gaffes by CEO Reed Hastings and the realization that growth would slow and expansion plans would bring the company's profitability down dramatically short-term. The situation hit bottom in the first quarter, when revenue fell slightly from the previous quarter and the company reported a loss of $0.08 per share, but profit is expected to return in the second quarter.

Most subscribers have forgotten the gaffes by now, and Netflix is now on an expansion march around the world. In the first quarter alone, the number of international streaming customers nearly doubled, and domestic paid subscriber counts began growing again as well. Analysts are expecting 2012 earnings per share to be just $0.09, with 2013 earnings per share jumping to $2.12. Considering the company has outpaced estimates in each of the last four quarters, a forward P/E ratio of 30 may be worth it in this disruptive business.

There are still plenty of challenges ahead, however. I don't think the current single-price streaming model will work long-term, and Netflix is going to have to adjust its subscriber options in the future to pay content providers appropriately for valuable content. But I would rather start from Netflix's subscriber base than from scratch in the streaming business, and that makes Netflix compelling at this price.

Burnt coffee beans
The plunge of Green Mountain Coffee Roasters has been dramatic and has prompted head-scratching at the same time. While the stock has been falling, revenue and profits have surged, and the company has run rings around analysts. Even after being bearish about the company's future, analysts continue to expect explosive growth and strong profits. For 2012, earnings estimates stand at $2.38 per share, and for 2013, they jump to $3.10.

That means the stock trades at 8.5 times 2012 estimates, and profits are only expected to improve. I understand the worry about expiring patents and competition from Starbucks, but Green Mountain has built up a strong following that Starbucks won't eliminate overnight, and it has a record of growing revenue, despite the predictions of its demise.

At this point, I'll throw out another possibility: If Starbucks really wants into this business, why not just buy Green Mountain Coffee Roasters and have K-Cups all to itself? It's profitable and the price is right.

I just don't see this business dying, and with a P/E ratio this low, Green Mountain Coffee Roasters looks like a great buy to me.

Back it up
I'm not just saying these three stocks are great buys, I'm backing it up with a CAPScall on each. I'm putting my 98.41 CAPS rating on the line with an outperform call to track my picks. To find the rest of my picks, see my CAPS portfolio here.

At one time these stocks were all multibaggers, and our analysts have found another they think fits the bill. Find out what it is in our free report found here.

At the time thisarticle was published Fool contributorTravis Hoiumdoes not have a position in any company mentioned. You can follow Travis on Twitter at@FlushDrawFool, check out hispersonal stock holdingsor follow his CAPS picks atTMFFlushDraw.The Motley Fool owns shares of Netflix, Starbucks, Amazon.com, and SodaStream.Motley Fool newsletter serviceshave recommended buying shares of Green Mountain, Amazon.com, Starbucks, Netflix, and SodaStream, as well as creating a lurking gator position in Green Mountain and writing covered calls on Starbucks. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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