5 Superball Stocks

" 'Don't catch a falling knife' ... 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."

So runs the thesis of my recurring Fool column "Get Ready for the Bounce," in which we search among the wreckage of Mr. Market's overturned cutlery drawer, hoping to find future winners in a pile of 52-week losers. But do we really need to sit around for a whole year, waiting for a potential bouncer?

I say nay. Sometimes, stocks fall far in far less time than a year -- and like a superball dropped from the balcony, the harder they fall, the higher they bounce. Today, we're going to look at a few equities that've suffered dramatic drops over the past week. With a little help from the 160,000 members of Motley Fool CAPS, we hope to find an opportunity or two for you:

Companies are selected by screening on finviz.com for abrupt 5% or greater price drops over the past week. 52-week high and recent price data provided by finviz.com. CAPS ratings from Motley Fool CAPS.

Five super falls -- one superball
Last week was a rough one for investors in these five companies, but the reasons for their troubles weren't always clear. Sure, RIMM's decline was to be expected. Combine a sales miss with Apple's threat to steal sales from key customer Verizon (NYSE: VZ), and a decline was foreordained. Likewise, Seagate's suffering in the wake of Bank of Montreal's downgrade.

In contrast, Ford seems to be getting no credit whatsoever for its strong performance in March sales rankings, while both TASER and VASCO Data Security seem to have dropped for no reason whatsoever. Of these latter two, investors at Motley Fool CAPS clearly prefer VASCO. Let's find out why.

The bull case for VASCO Data Security
CAPS member ElginBaylorkt calls VASCO a "Banks rally play." And for good reason. After all, the more profits Wells Fargo (NYSE: WFC) and its peers earn, the more money they have available to spend on VASCO's products.

And in an insecure world, the more banks secure themselves from hack attacks with VASCO's products, the more likely they'll attract and keep customers, which is good for profit. Because as CAPS All-Star Jeffreyw reminds us: "Data security continues to be a concern for individuals, small and large companies. Too many bad guys in the cyberworld!"

Indeed, CAPS member joepsthree tells us: "I work in the information security field. It is a rapidly growing industry and, as companies become increasingly reliant on computer systems to automate processes, will continue to grow more important. Companies such as [VASCO] are properly positioned to profit from this."

Buy the numbers?
Of course, the real question for investors is whether they can profit from buying the stock today. Is it "cheap" enough to be worth buying?

At first glance, it sure doesn't look it. VASCO trades for 26 times earnings today, pays no dividend, and is expected to grow at only 10% per year over the next five years. Worse still, the company generates even less free cash flow than it reports as "net income" under GAAP.

None of which presents a screaming bargain, to me.

Of course, VASCO bulls can point to analysts' historically miserable record at guessing how this company will perform and argue that the company could easily outperform its current growth estimate (as it's done twice in the past four quarters, by margins of 80% and 114%). Of course, it cuts both ways: VASCO underperformed in the other two quarters. Still, over the trailing four quarters, it did beat estimates by 32% overall.

Or investors may take comfort that the same analysts who hold a pessimistic long-term outlook for VASCO are far more optimistic in the short term, predicting the company will grow its earnings by nearly 35% in the coming year.

Time to chime in
Personally, as a long-term investor I'm inclined to avoid the stock based on its anemic long-term outlook, rather than gamble on a short-term spike on forward earnings. But that's just me. You are certainly welcome to take a different view.

If you do have a different opinion on VASCO, I'd love to hear it. Click over to Motley Fool CAPS today, and tell me why you think VASCO has got bounce-ability.