Drop-Dead Gorgeous Stocks

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"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."

So goes the thesis of my weekly Fool.com column "Get Ready for the Bounce." Therein, I run the 52-week-lows list compiled by Nasdaq.com through the "wisdom of crowds" meter that we call Motley Fool CAPS. And out the other end comes a list of stocks that have fallen so far that Foolish investors figure they're just bound to bounce back soon.

But is there a way to cash in on fallen angels who've plummeted even further? Perhaps. If a stock that's fallen for one year straight has headroom, then maybe a stock that's fallen even farther, and longer, has room to soar back even higher -- in which case, an apparently left-for-dead stock could offer us a drop-dead-gorgeous entry price. We're going to test that thesis today, starting with five stocks that just hit their five-year lows:

Company	Recent Price	CAPS Rating (out of 5):
Entravision Communications  (NYSE: EVC)	$3.20	****
Advanced Micro Devices  (NYSE: AMD)	$4.36	**
EW Scripps	$7.46	**
Cheesecake Factory  (Nasdaq: CAKE)	$14.01	**
McClatchy	$4.40	*

Companies are selected from the "New 5-Year Lows" list published on MSN Money on Friday. CAPS ratings from Motley Fool CAPS.

Left for dead? Or drop-dead gorgeous?
Each of the stocks listed above has shed between 45% and 95% of its value over the past year alone, and currently sits at or near its five-year low. Wall Street has left 'em for dead, but Main Street investors think at least one of these stocks has a chance to bounce back.

That one, obviously, is the sole four-star stock on the list -- Entravision Communications, a tiny TV and radio company that caters to the Latino market along the U.S.-Mexico border. Little threat to giants like CBS (NYSE: CBS), Disney's (NYSE: DIS) ABC, or GE's (NYSE: GE) NBC, Entravision could well make a tasty little morsel for an acquisitive, larger niche operator like Grupo Televisa (NYSE: TV) or Univision (which, indeed, already owns a stake).

But aside from the buyout scenario, is there any reason to believe Entravision can survive, or even thrive, on its own? That's what we aim to find out as we tune in to ...

The bull case for Entravision Communications 

• Late last year, seattlejames suggested that: "[Long] term, demographics going the right direction in the markets they serve. Trading at a reasonable rate as compared to 6 months ago."
• AESpot prefers to hedge his bets, conceding first that this: "Decently run Hispanic television media (not necessarily radio) makes for a good buyout target," but also arguing that: "the financials [given the] sectors lack of strength is decent."

So it would appear that CAPS members' answer to the question is: "No. Entravision is a play on a potential buyout at a premium, pure and simple." But I have to disagree. To me, Entravision looks like a good bet in its own right.

The company may not be reporting GAAP profits just right now, but from a cash profitability perspective, it's looking just fine. Free cash flow for the past 12 months comes to nearly $37 million. Measured against its market cap, that gives this the stock a price-to-free cash flow ratio of just less than 8. With most analysts who track the stock predicting it will grow its profits at 30% per year going forward, Entravision looks quite attractively priced to me. Buyout or no buyout, I have to think this one's a buy.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about Entravision Communications -- or even what other CAPS members are saying. We really want to hear your thoughts. Click on over to Motley Fool CAPS and tell us what you think.

Motley Fool CAPS : It's fun, it's free, and it just might make you famous.