After spending much of the past year at a mediocre three-star rank, Rackspace Hosting
Similar to other companies exposed to the fast-growing cloud-computing space, Rackspace sports a lofty earnings multiple that has many value-minded investors balking. Its price-to-earnings ratio sits in the high double digits, still below the triple-digit wonder Salesforce.com
But the potential growth of cloud computing has some CAPS members looking past the extreme valuation of the hosting and cloud computing company and seeing long-term potential as the firm continues to show strong results. Rackspace pulled in a solid second quarter with revenue up 23% and earnings growth of 60%. With strong trends in adding servers and customers, and big growth in revenue in cloud computing, the company remains bullish on the second half of the year.
The company isn't alone in seeing big things ahead in cloud computing, which research firm IDC expects will attract more than $44 billion in global IT spending by 2013. Verizon Communications
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Fool contributor Dave Mock recently upgraded his loafers with a new coat of polish. He owns no shares of companies mentioned here. Salesforce.com, Rackspace Hosting, and VMware are Rule Breakers picks. Amazon.com is a Stock Advisor recommendation.
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