5 Stocks That Laugh at Wall Street

In these dour economic times, Mr. Market seems to enjoy dogpiling on any stock that dares to fall short of analysts' estimates. To defy that trend, we're here to celebrate stocks that didn't merely meet Wall Street's predictions, but laughed in analysts' faces by leaving their miserly forecasts in the dust. The companies below have all soundly trounced earnings estimates by 20% or more in the last quarter:

Source: Yahoo! Finance. NA = not available.

Nonetheless, beating estimates isn't enough to make a stock a winner. Analysts are notoriously lousy at forecasting results, and one-time items can sometimes push earnings over the top. Wall Street professionals typically don't include such extraordinary events in their forecasts.  

Rather than focusing only on the past, we'll check whether analysts have a bead on future performance. With help from Motley Fool CAPS, we'll see which of the top companies listed above will have the last laugh.

The joke's on them
Not only does Amazon.com's surging stock price hearken back to the dot.com bubble days, but its valuation does, too. At more than 71 times trailing earnings and more than 48 times next year's earnings, even exuberant analyst growth projections can't hide the fact that the online e-tailer is richly valued. Not to put too fine a point on it, Amazon.com is overbought.

Don't get me wrong: I like Amazon, the company. I buy from them on occasion, and I respect the vision and foresight of Jeff Bezos in creating this Internet-based storefront that has only grown and improved over time. It's possible it's not too late to cash in, but Amazon, the investment, leaves me cold right now.

Sure, it's generating heaps of cash flow -- more than $1.9 billion over the past year -- but the market has priced all of that in and then some, without considering any of the risks. The market is discounting how Amazon is killing the Kindle e-book reader at a time when it faces growing competition from Sony (NYSE:SNE), Barnes & Noble, and even Microsoft. It could have partnered with Apple (NASDAQ:AAPL), but it went for a money grab instead. It's chosen to dabble around the fringes with speedier payment solutions like the just-unveiled "PayPhrase" option, so we can add that to our shopping cart of Checkout by Amazon and 1-Click Checkout.

Highly rated CAPS All-Star member ksiu1 sees Amazon as priced to perfection, adding that the slightest mistake will shatter the support it currently has:

I really like amazon and the service it provides but 68 times earning is a bit expensive. It's not like the economy's pointing towards a full blown recovery. Once these guys miss their next earnings estimate by .01 it's going to take a pounding.

Nearly half of all online retailers expect holiday sales to grow at least 15% this year, according to the market researchers at Shop.org. No doubt Amazon will join in the festivities, but the CAPS community remains wary. More than a quarter of all CAPS members rating Amazon.com mark it to underperform the market, and at more than 28 times free cash flow, I can understand why.

While my Foolish colleague Rich Smith feels that the e-commerce leader is still fairly priced, I'm disagree and am going to short it in my CAPS portfolio.

Foolish takeaway
Thus far, the market's rally has been mostly fueled by low-quality stocks. Got a different take on Amazon? If you think there's some funny business afoot, let us know -- head over to Motley Fool CAPS and sound off.