What a buyout rumor giveth, an analyst downgrade can taketh away. Just one day after its stock rose 8% on the heels of takeover speculation, Pixar (NASDAQ:PIXR) lost nearly half of those gains Thursday after Credit Suisse First Boston downgraded the shares.

The knockdown by CSFB, which argued that Pixar shares were priced for perfection, would make sense -- if we knew what perfection actually meant. That expression is usually reserved for companies that have richly priced shares to the point where they can't afford to miss analyst targets. What about companies that exceed Wall Street's defined perfection?

Last week, I picked Pixar as one of the compelling stocks that routinely beat the Street silly. Save for a single disappointing quarter -- the one ended in June 2005 -- Pixar hasn't just beaten estimates. It has trounced them, backed up, and trounced them again.

In its most recent quarter, Pixar was expected to earn $0.11 a share. How would you define perfection? Nailing it? Maybe coming in with a showing of an even dozen cents? No. Pixar wound up earning $0.22 a share.

In fact, let's look at how much Pixar has beaten the analyst consensus averages for profitability over the last few quarters:

Quarter

Earnings Surprise

Q3 2005 +100%
Q2 2005 +0%
Q1 2005 +43%
Q4 2004 +18%
Q3 2004 +58%
Q2 2004 +68%
Q1 2004 +15%


So when one argues that Pixar is "priced to perfection," whose perfection are we playing with here? The bar set by the market -- the one Pixar has easily vaulted?

The buyout speculation -- that Disney (NYSE:DIS) may either buy Pixar outright or acquire a significant stake in the computer animation leader -- may seem a bit farfetched, but we can't discount Steve Jobs' ownership of the majority of the Pixar shares. All he has to do is nod his head at an appropriate premium and it's a done deal. That didn't seem likely under CEO Michael Eisner, but Jobs' relationship with new chieftain Bob Iger has clearly started off on the right foot.

If Jobs feels that the ramped-up production slate at rival DreamWorks Animation (NYSE:DWA) and the many pixel-pasting upstarts will either threaten or dilute audiences' appetite for computer animation, maybe he wouldn't mind cashing out to Disney if the price were right.

That doesn't mean that one should buy a stock on the outside chance of a buyout. Buy a stock because it's a quality company. I'm not the only Fool who thinks that Pixar is just that. Motley Fool Stock Advisor has recommended the stock. It also has singled out DreamWorks Animation.

That's the funny thing about perfection: You just never know if this is as good as it gets.

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Longtime Fool contributor Rick Munarriz owns all of the Pixar releases on DVD. Yes, he owns shares of Pixar, too -- and Disney. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.