Stock analysts are just about as likely to be right with their forecasts as economists, meteorologists, and fortune tellers are. At least the weathercaster has a scientific basis for his predictions; everyone else is about as accurate as monkeys throwing darts.

Before the advent of Regulation FD, analysts were far more optimistic in their opinions. Today, they tend to think companies will underperform more than they do. State Street Global Advisors says that's because companies are "more explicit" in their guidance, in hopes of keeping share-price volatility to a minimum.

A guide to the future
If that's the case, then let's use the information that companies provide to our advantage. When they announce earnings, they also often update guidance for the coming quarter and year. These reports aren't 100% accurate, but a company is presumed to know its business better than anyone else does, and we can reasonably expect that its estimates would be better than most at predicting what the future will bring.

With the help of the Motley Fool CAPS investor-intelligence database, we can tap the collective thinking of more than 100,000 professional and novice investors on which stocks they think are best. We'll look at those companies that have guided higher and pair that information with stocks that CAPS believes has the best chance to outperform the market.

Here are five companies that have recently guided higher, coupled with what CAPS investors think:



Analyst Estimate/Previous Guidance

Updated Guidance

CAPS Rating (5 Max)

American Superconductor (NASDAQ:AMSC)

FY 2008




Xinhua Financial Media (NASDAQ:XFML)

Q3 2008




Rick's Cabaret (NASDAQ:RICK)

FY 2008




FY 2008




Indymac Bank (NYSE:IMB)

Q2 2008




Sources:, Motley Fool CAPS.

These are companies showing signs of growing their business, and analysts and the CAPS community both follow them. But this isn't a list of stocks to buy; instead, it's a list of suggestions for further research. In that vein, let's take a closer look at one of them.

Play it again, Sam
You can probably find Rick's Cabaret on just about anyone's list of "sin stocks" -- the companies that people love to hate (or is it hate to love?) because they cater to so-called vice. Count me, though, among those who would freely invest in the undefendable. A chain of upscale gentleman's clubs might turn some investors off, but it's also hard to argue with its performance: April revenue doubled in the latest quarter, and same-store, um, "sales" were up more than 11% from last year. That's a result Playboy (NYSE:PLA) could only hope to emulate -- it suffered through an 8% decline in its first-quarter revenues.

CAPS investor morgancaps finds Rick's comparable to a stock that investing great Peter Lynch might find attractive, at least because it rates high in the "ick" factor:

This company meets all of Peter Lynch's criteria for a great stock: it has very high growth of sales, earnings, and positive cash flow, especially compared to its [price-to-earnings ratio]. It has large insider ownership. The business is relatively recession-proof. ... Acquisitions are usually immediately accretive, and are often bought at least partly with equity. ... It owns about 18 clubs, but there are thousands of clubs that are potential acquisitions. ... Finally, it's a business in a disreputable industry, like Lynch's Service Corp. Int'l example from "One Up on Wall Street." The only thing it's missing is a nondescript name.

Yet even strong revenue growth isn't enough to sway some All-Star investors, including metoo105, who finds there's just too much to dislike about the strip clubs that has nothing to do with the prurient nature of the investment: "The amazing success that the company has enjoyed since opening a club in NYC to be "close to the analysts" has been extraordinary. … The basic idea here is that even if you can secure cheap debt, unless you are somehow able to get your employees to work under conditions of servitude, which exotic dancers rarely do in the country -- God bless America! -- then the margins here are totally absurd."

Guide on!
We want to know your opinion on Rick's. Your input can help guide other investors to stocks with bright prospects for growth. Head on over to Motley Fool CAPS, and let your voice lead the way.