4-Star Stocks Poised to Pop: Headwaters

Based on the aggregated intelligence of 135,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, building materials supplier Headwaters (NYSE: HW  ) has earned a respected four-star ranking.

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

Headwaters facts

Headquarters (Founded)	South Jordan, Utah (1987)
Market Cap	$134.53 Million
Industry	Construction Materials, Alternative Energy
Trailing-12-Month Revenue	$769.4 Million
Management	Chairman/CEO Kirk Benson (Since 1999) CFO Steven Stewart (Since 2007)
Return on Capital (Average, Past Three Years)	4.9%
Competitors	Alcoa (NYSE: AA  ) Owens Corning
CAPS Members Bullish on HW Also Bullish on	General Electric (NYSE: GE  ) Chesapeake Energy (NYSE: CHK  ) Apple (Nasdaq: AAPL  )
CAPS Members Bearish on HW Also Bearish on	Citigroup (NYSE: C  ) Bank of America (NYSE: BAC  )

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

On CAPS, fully 760 of the 815 members who have rated Headwaters -- some 93% -- believe the stock will outperform the S&P 500 going forward. These bulls include votrehomme and All-Star Babachrono, who is ranked in the top 2% of our community.

In May, votrehomme highlighted the stock's cleansing effects: "Alternative energy will be hot, especially that having to do with coal, which we've got a lot of but which is normally dirty. This company makes the soap."

In an earlier pitch, Babachrono predicted Headwaters would soon have its head above water:

Recently there has been lots of insider buying. Huge drop in revenue this last year. … Last 2 years they have burned cash, and will be out of cash if that don't fix that this year. Earnings have dropped since Q3 '07, and are at least 2 quarters from projected positive EPS. Believe it will improve as the housing market picks up and then with the push for clean energy. Looks to me to have more upside than down, going to get in here low and watch. Main concern and point to watch is if they keep burning through cash, or can stop that process and delay unnecessary items until their cash flows improve.

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