5 Stocks Approaching Greatness

Some companies are obviously great investments -- in hindsight. Sure, we should have bought Starbucks at its IPO and earned hundredfold returns over the years. Yet for every stock out there screaming "Buy me!" others simply give us a nudge and a nod. How can we tell tomorrow's obviously great investments from thousands of pretenders?

The stars' walk of fame
On Motley Fool CAPS, these opportunities can be found among our four-star stocks. In CAPS' proprietary ratings system, they rank higher than most of the other 5,400 companies in the CAPS universe, but they're just shy of superstardom. While all the attention might be focused on their five-star peers, we can sift through CAPS to find four-star companies approaching greatness:

• Zumiez (Nasdaq: ZUMZ)
• Adobe (Nasdaq: ADBE)
• Whole Foods Market (Nasdaq: WFMI)
• Riverbed Technology (Nasdaq: RVBD)
• Spartan Motors (Nasdaq: SPAR).

Some of these names might surprise you. Whole Foods, for example, is a pioneer in the high-end supermarket industry, bringing organic food to the mainstream and growing revenues far faster than competitors like Kroger (NYSE: KR).

Almost great? Even familiar names can offer some of the best opportunities. Perhaps we've just forgotten the potential they still hold. However, the 83,000 CAPS investors chose these companies as less obvious sources for tomorrow's great buys, so let's see why they might merit your attention.

Eyes wide open
Wide-area network optimization leader Riverbed Technology has enjoyed splendid growth since it went public two years ago, with ever more businesses needing to move large files over their networks at high speeds. Its technology has allowed Riverbed to enjoy revenues that continue to jump every quarter, even as the field continues to be crowded with rivals like Blue Coat Systems (Nasdaq: BCSI), F5 Networks, Juniper Networks, and even Cisco.

However, this former highflier was sent into a tailspin last October, when it merely met analyst forecasts and guidance in line with expectations. Riverbed's stock has been more than cut in half as a result, yet by quite a few measurements the stock is still richly valued. The stock trades at more than 100 times trailing earnings, but looking at forward estimates, the multiple falls to 19 times 2009 earnings. Riverbed is also valued at six times revenues, which is still pricey -- particularly considering that Blue Coat, F5, and Juniper all trade for less.

Investors may also be holding back because the rate of revenue growth has been steadily declining each quarter, despite the fact that it still doubled last quarter from year-ago levels. It's just hard for a company to maintain such a torrid pace for an extended time.

Riverbed hasn't run dry
CAPS All-Star OverlandParker was surprised by the market's reaction to last October's earnings report, considering not only how well the company did in the quarter, but also its outlook for the future. Perhaps analyst sentiment caught up with Riverbed, but regardless, he felt the sell-off was overdone, even if it continued to slide in the aftermath.

[I'm] not sure what [people's] expectations were but they obviously were way out of whack if those numbers that Riverbed reported were not good enough. [Riverbed] talked about how they have invested in the company to help maintain their "HyperGrowth" and are looking to increased margins even further moving forward. [Their] outlook for Q4 was really great as well and said they have not seen growth slowing.

A great opportunity for you
You've heard the latest on Riverbed Technology, but do you agree? Are these four-star stocks still investment-grade material? On Motley Fool CAPS, your input can influence how they're rated. Outperform or underperform, near term or well into the future, your opinion counts.

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