Resist the urge to high-five everyone in the cubicles next to you. Your stock may have just strapped on a rocket pack and taken off for the moon, but smart investors won't celebrate until they know that upward leap was justified. Without a fundamental basis for the bounce, these stocks can quickly make the return trip down.

Is now the time to lock in profits, or is this just the first step toward even higher valuations down the road? Let's examine several stocks that just hit the afterburners, and see whether they're truly headed into orbit.


CAPS Rating
(out of 5)


Vertex Pharmaceuticals (Nasdaq: VRTX)



Endologix (Nasdaq: ELGX)



Exelixis (Nasdaq: EXEL)



The market dropped another 107 points, or almost 1%, as concern continued about how rising oil prices will cause shocks throughout the economy. So stocks that managed to surge are even bigger deals.

New frontiers in investing
Citing "profound improvements in lung function" in patients with cystic fibrosis, Vertex Pharmaceuticals surged as analysts were already thinking that the miracle drug VX-770 could generate more than $500 million in sales.

The Fool's Brian Orelli notes that VX-770 is more than a step above the antibiotics produced by Novartis (NYSE: NVS) and Gilead Sciences (Nasdaq: GILD), because it treats the underlying cause of the illness not just the symptoms.

Yet as remarkable as the results are and for all the hope it gives to patients, he offers a word of caution for investors because the probability of achieving blockbuster status remains low. The drug only treats a small subset of those afflicted with cystic fibrosis, so considering the value to Vertex that analysts have placed on the treatment, the $1.1 billion surge in market cap that the drugmaker enjoyed makes it a rich price to pay now for the stock. As Orelli points out, "there are an awful lot of sales already priced into Vertex's valuation."

CAPS member gertmoller has already identified the Motley Fool Rule Breakers recommendation's "life changing research" as a reason to buy in, and more than 91% of those rating the biotech agree it will outperform the broad market averages.

But is it now at a price too high? Let us know on the Vertex Pharmaceuticals CAPS page whether this now carries a premium price.

A clean sweep
Analysts had been expecting Endologix to lose a penny per share in the fourth quarter, but when you back out both the costs and the income tax benefit it received from an acquisition, the developer of minimally invasive treatments for aortic disorders actually broke even and investors rejoiced.

While there is a bit of skepticism in the CAPS community as to how far Endologix can grow -- almost a quarter of those rating the medical device maker think it will ultimately underperform the market -- analysts have been unanimous that there's still a lot of room to move. One analyst says it's about to become the leader in treating abdominal aortic aneurysms because its stent graft design undergoing testing could revolutionize how the condition is treated. Nellix, the company it recently acquired, makes a device that's used to repair the aneurysms. That could put it ahead of rivals like Medtronic (NYSE: MDT), which make competing stent grafts.

Add Endologix to your watchlist to have all the Foolish news and analysis gathered together for you in one place, then head over to the Endologix CAPS page and let us know if it will graft itself to higher growth in the months ahead.

The sky's the limit
Another medical researcher beat expectations in the fourth quarter, propelling its shares higher. Exelixis, another Rule Breakers pick, hit a three-year high after it narrowed its losses to $0.16 a share, well ahead of the $0.22 loss analysts had forecast. While revenues were down, the potential for its prostate cancer therapy was a centerpiece during the earnings call. It already benefited from positive midstage trials for the treatment, as well as one for ovarian cancer, and the possibility of a buyout helped send its shares higher still.

Comparisons between Exelixis and Curis (Nasdaq: CRIS), another biotech that's been on a tear as a result of positive cancer drug trials, exist, but the hope for a buyout continues unabated. MajorBob04 thinks its product portfolio is chock-full of blockbuster candidates, which no doubt would be attractive to any potential suitor.

Add Exelixis to the Fool's free portfolio tracker and stay on top of all the developments coming out of this biotech leader.

Going into orbit
That's why it pays to start your own research on these stocks on Motley Fool CAPS, where you can read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from the stock's CAPS page. Then you can decide for yourself whether your stock's headed for reentry, or off to infinity and beyond.

Exelixis and Vertex Pharmaceuticals are Motley Fool Rule Breakers picks. Gilead Sciences is a Motley Fool Stock Advisor selection. Novartis is a Motley Fool Global Gains recommendation. The Fool owns shares of Exelixis, and Medtronic. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.