Individual stocks can surge 10%, 25%, or even higher in a short period of time. And they can fall just as far, just as quickly. For example, shares of women's clothing retailer New York & Co. fell nearly 30% on Tuesday, a day after the woman's clothier said it will likely post a larger-than-expected second-quarter loss.  

Big drops in share price can sometimes signal material defects or new risks. But at other times, they're simply pullbacks along with the larger pessimism facing the market today. Fortunately, we have Motley Fool CAPS, a great resource to help us understand the larger picture behind big price drops.

Is the sky falling?
CAPS contains more than just the crowd's opinions. Its best-performing members' votes count more in shaping each company's rating than do the picks of their poorer-performing peers. That way, investors can intelligently use the collective wisdom of more than 165,000 CAPS members to make better decisions.

We'll use CAPS' handy stock screening tool to quickly zero in on companies with three factors: their prices have fallen at least 20% in the last four weeks, and they have market caps greater than $100 million and betas of less than 3.

Company

CAPS Rating
(out of 5)

4-Week
Price Change

KB Home (NYSE: KBH)

*

(24.4%)

Chico's FAS (NYSE: CHS)

**

(24.2%)

Jamba (Nasdaq: JMBA)

****

(32.9%)

Source: Motley Fool CAPS. Price return May 14 through June 8.

KB Home
With the homebuyer tax credits now yielding to a timely death, many investors expect a muted recovery at best for homebuilders. The credits gave a boost to Pulte Group's (NYSE: PHM) first-quarter sales, but still weren't enough for others like Hovnanian (NYSE: HOV), which saw its fiscal second-quarter new home contracts fall. And management from both companies are cautious on the effects of the expired credits on sales going forward. With analysts estimating that KB Home will end up in the red this year, a large number of CAPS members are steering clear of the company, with only 41% of the 1,171 members rating KB Home expecting it to outperform the broader market.

Chico's
Even though profits more than doubled, the market just wasn't impressed with Chico's recent quarterly earnings report. The quarter included a 14.9% jump in same-store sales that topped the 14.1% increase reported by competitor Ann Taylor Stores (NYSE: ANN), but Chico's said that second-quarter margins might not be as robust as in the first quarter due to clearances. While Goldman Sachs analyst Michelle Tan recently upgraded Ann Taylor, Chico's was hit with a downgrade as the analyst thinks momentum may be "cresting." And as Chico's stock has approached a pricey earnings multiple in recent months, some CAPS members share similar concerns and have given shares the thumbs down. Overall, 86% of the 836 CAPS members rating Chico's still expect the stock to be a market-beating investment.

Jamba
Jamba's been making progress with its refranchising initiative, but its reduced company-owned store count has also contributed to falling first-quarter revenue, contributing to a continued decline in shares lately. It's looking to bring its comparable sales back into positive territory this year, and some CAPS members see turnaround potential in the smoothie purveyor. It's also been adding items to its menu like oatmeal and hot beverages in hopes of driving more store traffic, a move that McDonald's (NYSE: MCD) has recently made with its oatmeal testing in 600 stores in the Northeast. It also plans to build its international presence with big plans for 200 stores in the next decade in South Korea. All the prospects for growth have many investors anticipating big things, as 94% of the 777 CAPS members rating Jamba believe it will beat the broader market.

Ultimately, whether or not you believe a fall in any stock is warranted, your own research is more important than collective opinions. CAPS can help you quickly focus your due diligence, and even point out potential pitfalls you may not have seen.

Add your take on these or any of the 5,400 stocks that 165,000-plus members have covered in Motley Fool CAPS. It's totally free to be a part of the community, and the payback is more than worth it.

The Motley Fool Stock Advisor service looks for companies with strong management poised to beat the market over the long haul. To see all the stocks that have helped Tom and David Gardner beat the market by 59 points on average, take a free 30-day trial.

Fool contributor Dave Mock habitually looks for silver linings in even the darkest of clouds. He owns no shares of companies mentioned here. The Fool's disclosure policy is made of sugar and spice and everything nice.