5 Stocks That Just Won't Quit

In my weekly Fool column "Get Ready for the Fall," I run Nasdaq.com's 52-week highs list through the "wisdom of crowds" meter we call Motley Fool CAPS. The result: a list of stocks that have flown so high, investors are starting to get nervous about that whole "gravity" thing. But while many stocks will indeed plunge back to earth, some seem immune to gravity, steadily riding a rising megatrend to ever-greater heights.

Today we'll move beyond stocks that have hit 52-week highs, and identify companies surpassing five solid years of outperformance. Which of these will thrash the market averages for another half-decade? Here are this week's leading contenders:

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

Hot stocks leave investors cold
Is the recession over? Warren Buffett says it is, and with the Dow still comfortably above the 10,000 mark, and the S&P posting sizable gains of its own last week, it seems investors are starting to come around to Buffett's way of thinking. Bullish sentiment is back, and the five stocks named above are all hitting 52-week highs. But for how long?

Judging from the CAPS ratings being handed out, it seems investors have begun rethinking their optimism about many of these stocks. Meanwhile, the one company they're not worrying about is the very same company that occupied the very same place on this very same list two months ago. The company I warned was overpriced then -- and is even more so now:

Teva Pharmaceutical
Before I explain how the numbers doom Teva to underperformance, let's let the bulls have the first snort. CAPS member Jross11 starts us off with the observation that Teva: "fills 1 out of every 6 Prescriptions in the U.S ... It recent aquistion of Barr, and thier desire to be the leader in Womens Heath, while al others are runnin away from this area, shows Tevas' strong desire to join the big boys like [Pfizer (NYSE: PFE) and Johnson & Johnson (NYSE: JNJ)] in becoming a leader in Braded Pharmaceuticals."

CAPS member TevaForever is (surprise!) similarly enthusiastic about the company's prospects, arguing that this: "multinational producer of ethical & generic drugs ... with its entry into the bio simmilar market ... will continue to prosper. With the ever increasing longevity of people in the developed world the demand for medication is increasing to assure the quality of life in old age."

And even fellow Fool and CAPS All-Star TMFPhillyDot argues that: 

Teva has a near strangle hold on the generics market, which should help them to aggressively boost revenues over the next 5-10 years. ... [Also,] Teva should be coming out with an oral version of Copaxone within the next year or two. ... An oral form of Copaxone would be absolutely huge for Teva and for MS patients in general. I think the market underestimates the upside.

With so many stars aligning in its favor, it's little wonder that Teva enjoys such strong support on CAPS. However, here's where we come to the key difficulty with Teva: the difference between the company's prospects, and those of the stock. While I've nothing bad to say about Teva's business prospects, I just cannot justify the valuation of the stock -- and valuation still matters. So here's how the numbers work out:

Right now, Teva is selling for nearly 28 times trailing earnings. It's a fantastic cash generator, however, and valued on its $2.65 billion in free cash flow, the stock's actually commanding a multiple under 20. Problem is, I just don't believe that Wall Street's projected 12.7% long-term earnings growth is enough to sustain such lofty valuations.

Time to chime in
That said, it's worth pointing out that:

• First and foremost, I've been dead wrong about Teva so far. The stock's gone from high to higher, gaining 8.5% in value since I last panned it, against a less-than-1% rise in the broader S&P 500.
  
  
• Second, TMFPhillyDot -- one of the best investors we track on CAPS -- thinks Wall Street's "underestimating" Teva's growth potential. If he's right about that, and if Teva can outgrow the Street's 12.7% expectations, then it's entirely possible the stock is in fact worth owning at today's price.

I don't buy the thesis. But that doesn't mean you need to agree. In fact, if you believe I'm misreading the situation at Teva, I'd love to hear why -- and how. Click over to Motley Fool CAPS now, and tell me why I'm wrong.

Is there such a thing as a growth stock selling for an attractive price? There is. There are. They're here.