When stocks fall fast and far, they sometimes set themselves up for remarkable rebounds. The following equities suffered dramatic drops over the past week. With help from the 170,000 members of Motley Fool CAPS, we'll see whether any of them have the potential to bounce back:
How Far From 52-Week High?
(out of 5)
National Oilwell Varco
Companies are selected by screening on finviz.com for abrupt 10% 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
There's no two ways about it. If you owned any of the five stocks named above last week, you're significantly poorer for it today. So what went wrong?
The answers vary. At Atwood, for example, earnings actually went quite well last week. The company held the line on revenues and grew its earnings by a nickel compared with last year's first quarter. This was better than predicted. On the other hand, Atwood is in the oil biz, and oil prices just suffered their "largest drop in the history of oil trading," according to ABC News.
If that was bad news for Atwood, it was simply horrific for National Oilwell Varco. On top of being tarred as an "oil play," National Oilwell is still reeling from the effects of its own earnings miss two weeks ago. Not even an upgrade from Citigroup could save it.
Proceeding down the list, Manitowoc continues to slump post-April-earnings. It looks especially weak in comparison to fellow industrial play Caterpillar
General Moly? Generally miserable. It's still unprofitable, and the first quarter did nothing to change that.
In fact, the more I look at today's five-star underperformers, the more I begin to think that it's time to widen our survey, and consider a stock that's maybe a bit less popular -- and a bit less likely to be overvalued. Which brings us to …
The bull case for TTM Technologies
Only a four-star stock on CAPS, you might think TTM is a worse bet than the several five-starred stocks named above. But CAPS member hchemas begs to differ: "It is riding the smartphone ride with its high quality printed circuits."
Elijahnu calls TTM "the dominant manufacturer of circuit boards. It supplies to many manufacturers and is poised to continue growing."
And Escale seconds (thirds?) the emotion: "TTMI has grown in the last year and I believe that this will continue to take off … generating a large cash flow. … With an insider control of 35% you know the insiders will be keeping track of their company on a daily basis."
And in fact, I'm pretty optimistic myself. Last week I gave you a quick update on why TTM's stock was down -- at a time when most folks in the mainstream media took the sell-off as self-explanatory, or ignored the story entirely. Today, I'm back to flesh it out a bit.
As I mentioned on Friday, the trouble at TTM began with a missed sales estimate. On the other hand, the company seems to have beat guidance on earnings. And while it's true those earnings were down from the fourth quarter in 2010, TTM management told us this was perfectly normal seasonality in its business.
Well and good. Quickly crunching the numbers on valuation, I noted that TTM seemed attractively priced at 14 times earnings. That's more than rival PCB maker Sanmina-SCI
Foolish final thought
If I've got one reservation about investing in TTM, it's the fact that management failed to include a cash flow statement in its earnings release last week (tsk, tsk.) Still, when you consider that (1) TTM has averaged close to $60 million free cash flow every year for four years straight now, and (2) CEO Kent Alder confirmed "North America operations continue to generate solid cash flow," I think it's likely TTM is still generating about $60 million in annual FCF.
If I'm right, that would give TTM a price-to-free cash flow ratio of about 22 -- not unreasonable in light of the company's projected 20% annual growth rate. And if TTM turns out to have generated more free cash flow than I think when it reveals the correct number in its 10-Q filing? Why, then, dear Fool -- we just might get our bounce.
That's my read on the company, at least. What's yours?
Fool contributor Rich Smith does not own shares of any company named above -- but he's giving TTM Technologies some serious consideration. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 490 out of more than 170,000 members. TTM Technologies, Atwood Oceanics, and National Oilwell Varco are all Motley Fool Stock Advisor selections. Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.