3 Top Stocks at Half Price

You love buying your shirts when they go on sale. And who can resist a buy-one-get-one-free offer? So when our stocks go on sale, why do we bemoan their low prices?

Smart investors like Warren Buffett or Marty Whitman love it when their stocks are suddenly selling at bargain-basement prices. For them, these companies become no-brainer buys.

The investors in the Motley Fool CAPS community also like a bargain, apparently. Below, you'll find three companies whose shares are selling at least 50% below their 52-week highs, but which still earn high honors from our investor-intelligence database. Consider it a BOGO sale on stocks.

Stock

CAPS Rating (out of 5)

% Off 12-Month High

A-Power Energy Generation Systems (Nasdaq: APWR  )

*****

69%

DG FastChannel (Nasdaq: DGIT  )

****

56%

DragonWave (Nasdaq: DRWI  )

*****

51%

Naturally, we want you to look a bit closer at these stocks before buying. You can get low-priced appliances in the dent-and-ding section of your home-remodeling superstore, but their quality might not be so good. Same thing here: Make sure there's nothing seriously wrong with the company before you plug it into your portfolio.

Take two, they're small
Most of the concerns surrounding DragonWave deal with how fast top customer Clearwire (Nasdaq: CLWR  ) diversifies its suppliers, and shifts business to main competitor Ceragon Networks (Nasdaq: CRNT  ) . With Clearwire providing the bulk of DragonWave's revenues, it's not a concern to be taken lightly, particularly since revenues are going to drastically slow down. Yet with the stock trading at less than six times earnings and comparing it to its growth prospects, DragonWave does look cheap.

CAPS member Xiaxio thinks DragonWave and its rivals stand to gain from the current growth in their sector:

It is in a market sector that will grow a lot more than average.
[DragonWave] and [Ceragon] are very well positioned to obtain gains in this sector. I personally think both have a lot to gain right now.

A reserve player
A loss of customers hit Internet marketing and advertising provider DG FastChannel, too. The digital media maven saw a material shift in its customer mix for its leading Pathfire service that resulted in a decline in its primary standard definition business. Predictably, that brought the trial lawyers out of the woodwork alleging that management should have warned investors of the changing dynamics of the business.

Yet FastChannel says pricing for its high definition segment remains strong, and the normal seasonal slowdowns it usually experiences at this time of the year are distorted as a result of the resurgence in buying that occurred last year. It's confident the new acquisitions it made will contribute to fourth results, but the third quarter will be substantially weaker than analysts were expecting.

With 94% of the CAPS members rating DG FastChannel to outperform the broad market averages, it doesn't seem like many think the business won't recover. You can add the digital media specialist to your My Watchlist page and have all the Foolish news and analysis about this stock aggregated for you.

No assurance of growth
A-Power Energy Generation Systems is China's largest provider of distributed generation systems that's zeroing in on renewable energy, with project sizes going as high as 400 megawatts of power. It's also one of the largest wind turbine manufacturing operators in the country. Which could be one of the problems.

The alt-energy leader's cost of capital has taken a hit as it has had to resort to expensive financing for new manufacturing facilities abroad just to keep pace with General Electric (NYSE: GE  ) and Siemens (NYSE: SI  ) in wind power and profits have fallen year-over-year. Despite this, the market values the company at 37 times those earnings, a pretty hefty multiple for a growing company and astronomical for one that's been sagging.

A P/E ratio isn't always the best metric to measure a company, however, which is why CAPS investor dnblack says to look at how it trades in comparison to its book value in determining whether A-Power will power up:

Trading near book value. 15.5% float is held short with a short ratio of ~6 days. I expect shorts to cover soon around this level and maybe cause a short squeeze.

You can add your own favorite metric to value a stock on the A-Power Energy Generation Systems CAPS page.

Have half a mind
Sign up today for the completely free CAPS service, and tell us whether these stocks are twice as good at half the price.

Ceragon Networks is a Motley Fool Hidden Gems choice. Try any of our Foolish newsletter services free for 30 days

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


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