Get Ready for the Bounce

"Don't catch a falling knife," as the old saw commands. (Pardon my mixing a cutlery metaphor.) The idea of buying a former superstar stock at a discount price certainly has its attractions, but you've got to make sure you catch the haft -- not the blade. That's where Motley Fool CAPS comes in.

Today, we once again stand beneath Mr. Market's silverware drawer, measuring which knives have fallen the furthest. Then we'll call on CAPS to ask which of these stocks -- if any -- Foolish investors believe are ready for a rebound. Let's meet today's list of contenders, drawn from the latest "52 Week Low" list at Nasdaq.com:

 

52-Week High

Recent Price

CAPS Rating (out of 5):

Loral Space & Communications (Nasdaq: LORL  )

$51.56

$17.66

**

UnitedHealth Group  (NYSE: UNH  )

$59.46

$30.74

****

Pepsi Bottling Group (NYSE: PBG  )

$43.38

$30.71

***

Scotts Miracle-Gro  (NYSE: SMG  )

$49.69

$24.36

***

BearingPoint  (NYSE: BE  )

$8.00

$1.22

*

Companies are selected from the "NASDAQ 52 Week Low" list published on Nasdaq.com on the Saturday following close of trading last week. 52-week high and recent price provided by Yahoo! Finance, as of the same date. CAPS ratings from Motley Fool CAPS.

Knives and knaves
If there's one good thing about a broad-based market sell-off, it's that you find a lot of terrific companies getting the ol' baby 'n' bathwater treatment; tossed out on their rosy little bums as if they were bums of another sort. You know -- just know -- that some of these babies are gonna bounce right back once the suds subside.

Case in point: A (bare) majority of the stocks on this week's list actually rate average or above in the estimation of CAPS players, and in fact, only one of the five receives a low one-star rating on CAPS.

But what happened with Loral? On Friday it was a four-star company, but today it is a two-star one. Join me as we examine ...

The bull case for Loral Space & Communications
Loral's raison d'etre is building satellites for the likes of EchoStar (Nasdaq: DISH  ) , Sirius Satellite Radio (Nasdaq: SIRI  ) , and Intelsat.

  • Back in March, CAPS player karavasilis gave Loral the thumbs-up based on: "Recently signed contracts for GEO sats, improved margins, great outlook."
  • A few weeks before that, aj350 had tagged Loral an outperformer based on the following factoids: "1) Backlog for satellite construction is over $1.5 billion. 2) Construction is low margin for these guys, margins on services are HUGE. 3) As backlog is converted into finished products, servicing of these products should increase," concluding that, "Against [an] enterprise value of $600 mil or so, technically their services division alone can be worth at least $400-500 mil consider 0 future growth!"
  • More recently, jdlech pointed out that the stock is: "Currently trading at nearly half its book value."

Regardless of the above numbers, it would be nice to hear some good news from Loral. Historically, the company has usually operated at a loss under GAAP. It's also burned through nearly $170 million in free cash flow over the past five fiscal years -- not good. With numbers like these, is there any realistic possibility that Loral will indeed bounce?

I rather think there is. As bad as Loral's business looks on the surface, it's backed up by a rock-solid balance sheet comprised of more than $200 million cash, more than half a billion in long-term investments in affiliated companies, and no long-term debt. (The company does have pension obligations and "long-term liabilities" comprised mainly of potential tax claims.) With its balance sheet on firm ground, Loral looks poised to reach for the stars ... just as soon as it figures out a way to earn a consistent profit.

Time to chime in
Ah, but that's the real question, isn't it? Will Loral turn profitable, and realize its potential? If you've got an opinion, we've got a place to voice it. Click on over to Motley Fool CAPS and tell us what you think.

UnitedHealth Group is both a Stock Advisor and an Inside Value recommendation. To find out why, try either investing newsletter free for 30 days.

Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 1,526 out of more than 110,000 players. The Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 666454, ~/Articles/ArticleHandler.aspx, 9/23/2014 2:41:35 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement