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, 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 farther? Perhaps. If a stock that's fallen for one year straight has headroom, then maybe a stock that's fallen even farther, and for 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:

	Recent Price	CAPS Rating (5 max):
Entegris  (Nasdaq: ENTG)	$5.65	*****
Edge Petroleum	$3.43	***
Energy XXI	$3.33	***
Nortel Networks  (NYSE: NT)	$5.30	**
Playboy Enterprises  (NYSE: PLA)	$3.98	*

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

Left for dead? Or drop-dead gorgeous?
Each of the stocks listed above has shed between 35% and 80% of its value over the past year alone, and currently sits at or near its five-year low. Wall Street has left 'em all for dead, but on Main Street, their popularity runs the gamut from loathed (Playboy) to loved (Entegris).

Seeing as we're looking for the company most likely to turn the corner, we're really only interested in the latter. So without further ado, let's take a closer look at this self-described "leading provider of a wide range of products for purifying, protecting and transporting critical materials used in processing and manufacturing in the semiconductor and other high-tech industries." (Which sounds a bit like puffery to me. Then again, customers as varied as Advanced Micro Devices (NYSE: AMD) and IBM (NYSE: IBM), Motorola (NYSE: MOT) and Plug Power (Nasdaq: PLUG) sure seem to think Entegris does a good job.)

The bull case for Entegris 
Surprise! There isn't one.

Oh, sure, a couple of CAPS members have chimed in with pitches in Entegris's favor. But their depth is, I fear, a bit lacking. One player reminisces over how well Entegris performed in a stockpicking game back in high school. Another describes the company as "rebounding." Unfortunately, that was two years ago.

Buy the numbers
It appears, dear Fools, that we're going to have to do the heavy lifting on this one ourselves. At first, it seems a hopeless task. Entegris sells for a 24 P/E, yet analysts only expect it to grow at about a 15% pace over the next five years. Hardly a lot of value in that, eh?

But look again, and you may see something different. Namely:

• $65.6 million in free cash flow generated over the past year, which figure eclipses Entegris's reported profits under GAAP by more than two times
• A price-to-free cash flow ratio of less than 10
• A record of never burning cash in any year for the past decade
• And while we're on the subject of cash -- more than $100 million in net cash on the balance sheet

Impressive stats. On the surface, at least, it looks to me like Entegris could be as much as 33% undervalued based on its P/FCF and projected growth rates alone. And if the semiconductor sector rallies, and with it, demand for Entegris's products? Why, the profits could be even bigger.

Time to chime in
But my opinion is not set in stone. The valuation on this one entices me, but I'm sure there are Fools out there who know more about chip makers and their suppliers than I'll ever learn.

If that Fool is you, then here's your chance to share your knowledge with your fellow investors -- and reap ever-lasting fame in CAPS-land for your genius. Just click on over to CAPS and tell us: Is Entegris dead in the water, or is it drop-dead gorgeous?