3 Stocks Making a Comeback

With all the volatility in the markets today, there's no shortage of market seers trying to call a bottom. Person of the Year Ben Bernanke called a bottom not once, but twice, yet some economists still argue that the worst is yet to come.

Likewise, many investors wait anxiously for the market to come back and salivate at the opportunity to nab good companies beaten down to great prices. That's why we here at the Fool -- and 165,000-plus investors like us -- look to the Motley Fool CAPS community to help sniff out the real opportunities from languishing companies driven by speculation.

A real bottom or another leg down?
Of course, there's no foolproof method for timing a market bottom. But CAPS has a great balance of both quantitative and qualitative resources available on 5,400 stocks, and even a nifty stock screening tool to help investors quickly zero in on potential opportunities.

I've used the CAPS screener to filter out $100 million-plus companies whose stock price appreciated by at least 30% in the past 52 weeks even while they sit at least 40% below their 52-week high.

Source: Motley Fool CAPS.

Sunrise Senior Living has been scrambling to deal with debt issues over the past year, with hundreds of millions of dollars owed already in default. While a recent settlement with the Securities and Exchange Commission closes an investigation and lifts a huge weight off its shoulders, many CAPS members still hold a bearish outlook for the stock and give it a two-star rating. Joe's Jeans, on the other hand, sports a solid four stars and offers recent strong sales momentum.

The bottom case
CAPS members cite several reasons why Joe's Jeans may be looking at more upside. The high-end clothing designer reported a 41% year-over-year increase in first-quarter net sales and followed that strong performance with a 51% jump in the second quarter. CAPS members see some big potential in its growth plans, with the company opening new retail stores and launching new lines as it looks to build on the momentum into the fall season. Joe's Jeans has also reported an increase in international wholesale sales, helped mostly by a 19% sales increase in Europe -- where competitor True Religion Apparel (Nasdaq: TRLG) aims to expand with a joint venture with one of its foreign distributors.

Investors also like some of the signs that consumers are loosening up their wallets. Joe's Jeans' two largest customers, Macy's (NYSE: M) and Nordstrom (NYSE: JWN), both reported an increase in same-store sales for the month of June, while some other trendy clothing stores such as Abercrombie & Fitch (NYSE: ANF) also posted an increase in sales.

Or further to fall?
Even though Joe's Jeans has impressed many with its top-line growth, its plans to expand come at a price that could mute earnings. Second-quarter earnings fell 60% because the costs of opening up new stores ate up much of the strong sales before they reached the bottom line. And on a macroeconomic level, not all signs are pointing to a robust economic rebound. Government data showed weaker second-quarter economic growth compared with the first quarter, while the Commerce Department said retail sales fell for the second consecutive month in June. And MasterCard (NYSE: MA) Advisors' SpendingPulse data showed its first drop in luxury spending in June since November. As a result, some investors worry that spending on Joe's Jeans' high-end clothing may not keep up its recent pace.

What's your call?
Overall, 98% of the 487 CAPS members rating Joe's Jeans see it outperforming the broader market. For my part, I stay away from fashion clothing makers unless shares are at a steep bargain. At this price, Joe's Jeans doesn't fit.

But what ultimately counts is your own opinion; CAPS is just there to help you form it. The best part is that the Motley Fool CAPS database is all free, and you can even add your own insight on any of the 5,400 stocks that our 165,000-plus members have covered.