Get Ready for the Bounce

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"Don't catch a falling knife," as the old saw commands. (Pardon my mixing a cutlery metaphor.) 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. That's where Motley Fool CAPS comes in.

Today, we once again stand beneath Mr. Market's silverware drawer, measuring which knives have fallen the farthest. Then we'll call on CAPS to ask which of these stocks -- if any -- Foolish investors believe are ready for a rebound. Let's meet today's list of contenders, drawn from the latest "New 52-Week Lows" list at MSN Money:

Company	52-Week High	Recent Price	CAPS Rating (5 max):
FARO Technologies (Nasdaq: FARO)	$36.18	$13.44	*****
Dr. Pepper Snapple	$26.85	$17.56	****
Harley-Davidson (NYSE: HOG)	$50.04	$15.35	***
Sears Holdings (Nasdaq: SHLD)	$122.25	$38.27	**
New York Times	$21.14	$7.34	*

Companies are selected from the "New 52-Week Lows" list published on MSN Money on the Saturday following close of trading last week. 52-week high and recent price provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

If there's one good thing about a broad-based market sell-off, it's that you find a lot of terrific companies getting the ol' baby 'n' bathwater treatment. Tossed out on their rosy little bums as if they were bums of another sort. You just know that some of these babies are gonna bounce right back once the suds subside.

Of the five stocks hitting 52-week lows shown above, CAPS members declare FARO Technologies cutest of them all. Why? We're about to find out, as we review ...

The bull case for FARO Technologies

• CAPS All-Star saunafool introduced us to FARO late last year as a manufacturer of "3 dimensional laser measuring tools that totally transform a lot of manufacturing and repair industries. There is no doubt that adoption of this technology will grow for years." Indeed, such industry stalwarts as General Motors (NYSE: GM) and General Electric (NYSE: GE), Boeing (NYSE: BA) and Lockheed Martin (NYSE: LMT), already patronize FARO's products.  
  
• In March, fishbed21 suggested that: "Even though the pace of construction is bound to slow down in U.S. due to a slump in economy as we see it now, the accelerated speed of construction and development in rest of the world should allow plenty of opportunity for this company to sell its services, soaring its value."
  
• A sentiment echoed by Jeffreyw last week: "FARO will benefit with the recovery of manufacturing and construction. Buy at these low prices today!"

How low, you ask? Thanks in large part to Friday's sell-off, FARO sells for just 11 times trailing earnings, giving it a nearly 0.5 PEG ratio, once you apply Wall Street's projected 20% growth rate.

Granted, when viewed from the perspective of free cash flow (FCF), FARO isn't quite as profitable as that first glance suggests. Yet despite its depressed FCF, the stock still sells for a P/FCF ratio of less than 19 -- still a bargain, if FARO achieves the growth that analysts expect of it.

Will the onrushing global recession postpone that growth? I expect so. But I'm also confident that once global growth returns, FARO will still be around to enjoy it. While cash isn't exactly pouring through the front door, FARO already has more than $100 million -- nearly half its market cap -- tucked away for a rainy day. With that cash cushion to lean on, I expect FARO will weather the storm just fine.

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

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