Get Ready for the Bounce

"Don't try to catch a falling knife," as the old saw commands. (Pardon my mixing a cutlery metaphor.) 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. That's where Motley Fool CAPS comes in.

Today, we once again stand beneath Mr. Market's silverware drawer and measure which knives have fallen the farthest. Then we'll call on CAPS to ask which of these stocks -- if any -- Foolish investors believe are ready for a rebound. Let's meet today's list of contenders, drawn from the latest 52 Week Low list at Nasdaq.com:

Knives and knaves
Everybody loves a winner. That's the way Wall Street is supposed to work. As a stock gets more expensive, momentum investors rush to buy it. But when stocks go on sale, buyers tend to head for the hills.

No longer. Or at least, not this week, where we find ourselves with a list chock-full of above-average-rated stocks, along with one "rule" to prove the exception.

So what are we to do with this embarrassment of riches? Which of our quartet of four-starred stocks shall we profile today? I'm exercising my editorial discretion and going with the one that, to my Foolish eye, seems to offer the best price. More on why I think the price is fair in a moment. But first, let's listen in as our CAPS players lay out ...

The bull case for Steiner Leisure

• NetscribeEntnmnt introduces us to the company:
  
  Steiner Leisure ... is a leading worldwide provider of Spa products and services. ... The services segment contributes around 60% to the [overall] tally and primarily focuses on operation of [spas] in Spa resorts and in more than [100] cruise ships. The rest of the revenues are generated by [the] Products segment, which offers high quality beauty products under Elemis and La Therapie brands. Steiner also owns and operates schools to train spa professionals. With recent acquisition of Utah vocational schools this segment has the potential to be a major contributor in the coming year.
  
• CAPS All-Star jsikorsk pointed out last spring: "Steiner has fingers in pies on all the major [cruise] lines. More people will cruise, especially as land-based vacations become more expensive (the reason for my last cruise)."
• NorwayInvest thinks the company has a "good moat, low debt ... [consistent] 20% growth, PEG=1."

Of course, NorwayInvest wrote that pitch nearly one year ago. So how is Steiner looking today? According to fellow Fool Rick Munarriz, who recommended the stock for our Motley Fool Rule Breakers newsletter service, Steiner currently operates the spas on a whopping 132 cruise ships. That includes boats by everyone from Carnival (NYSE: CCL) to Royal Caribbean (NYSE: RCL) to Disney (NYSE: DIS). Sounds like a pretty wide moat to me.

Low debt? Try no debt.

Consistent 20% growth? Close. A little more than 19% per year on average over the past five years. But if you listen to the Wall Street analysts, you'll hear that Steiner is likely to see that growth slow to 12% per annum over the next five years. Still, with the stock selling for just 13 times trailing earnings and 14 times trailing free cash flow, that looks like a fair price to me.

I'll hold off on calling "all aboard" until the PEG ratio drops a bit further, if you don't mind, but even at this price, I suspect that few investors will experience seasickness investing in this one.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about Steiner Leisure -- or even what other CAPS players are saying. We also want to hear your thoughts. Is the cusp of a recession really the right time to be investing in the cruise industry, or does today's price already incorporate that risk? Click on over to Motley Fool CAPS, and tell us what you think.

Motley Fool CAPS: It's fun, it's free, and it just might make you famous.