7 Highly Rated Stocks on Sale

I am always looking for a good deal, whether that means buying three boxes of Frosted Mini-Wheats when they go on sale or pouncing on undervalued stocks. The idea that anybody would sell a stock for less than its worth may seem silly, but legendary value investor Ben Graham tells us, by way of allegory, how we can look out for these situations.

In The Intelligent Investor, Graham introduces readers to a crazy guy named Mr. Market. Mr. Market's game is to pay you house calls on a daily basis to offer to sell you interests in businesses he owns or to buy from you interests in businesses you own. Sometimes Mr. Market will show up at your door very excited and offer you premium prices for your holdings, while at other times he'll be totally depressed about the future and will offer to sell you what he has for as low as pennies on the dollar.

So to find some of the stocks that Mr. Market is depressed about, I've turned once again to The Motley Fool's CAPS investor community. Each of the companies below had been given a five-star rating (the highest) by our community of investors just 30 days ago:

As the chart shows, these stocks are all still very well-regarded by the CAPS community despite their underperformance over the past month. While these are not formal recommendations, they could be a great place to kick off some further research. I'll even get you started with some thoughts on Corporate Executive Board.

CEB gets taken to school
Mr. Market rarely shies away from reeducating companies on just how the market works. Even successful companies like Stock Advisor pick Corporate Executive Board are fair game. Last week, when CEB announced earnings for the first quarter of 2007, the market sang a Schoolhouse Rock!-esque ditty that went a little something like this:

You may be trying
To build a great firm
But seriously, when will you learn?
The quarter end
Is when we get to see
What exactly have you done lately?

The answer in this case was earnings per share that edged out Wall Street estimates, but revenue that was a bit softer than expected. The company also committed the big no-no by adjusting down its estimates for 2007 (the market hates that). When all was said and done, Mr. Market had delivered a one-day lesson that cost CEB's stock a hefty 18%. This isn't the first time over the past year that CEB's results have disappointed investors' high hopes, and the stock has dropped nearly 40% over the last 12 months as a result.

For investors looking at a longer timeline, though, the price cut may look like a good opportunity. CEB continues to produce far more operating cash than it does net income, and it is still doing this with a very low level of capital spending. Metrics such as average subscriptions per member institution and renewal rate also keep moving in the right direction, which speaks to the value that customers see in CEB's programs.

On CAPS, players like DrunkenScotsman also see a lot to like about CEB. He highlights that the company has no long-term debt, a high return on equity (ROE), high earnings growth over the last 10 years, and pays a dividend to boot. Following the recent throttling CEB's stock took, NuvoRiche adds, "[CEB was] hammered from $105 to $58 in several increments due to slowing growth, but this Motley Fool newsletter pick remains profitable and unchanged. Thank you to the investing deities for dropping this one in my lap."

So is Corporate Executive Board looking like a tasty treat right about now? Let the community know what you think -- head over to CAPS and share your thoughts with the other 28,000 players who are currently part of the community. Even if you'd prefer to pass on CEB, you can check out a couple of the other stocks listed above -- or any of the 4,400 stocks rated on CAPS.

For more CAPS coverage:

• 7 Top Stocks That the Insiders Own
• This Just In: Upgrades and Downgrades
• Make the Call: The Best Bets in Chinese Telecom

Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. You can check out Matt's CAPS portfolio here, or tune in to his CAPS blog here. The Fool's disclosure policy recalls the day when it taught Mr. Miyagi how to sand the floor.