In my weekly Fool column "Get Ready for the Fall," I run Nasdaq.com's 52-week highs list through the "wisdom of crowds" meter we call Motley Fool CAPS. The result: a list of stocks that have flown so high, investors are starting to get nervous about that whole "gravity" thing. But while many stocks will indeed plunge back to Earth, some might steadily ride a rising megatrend to ever-greater heights.
Today, we'll move beyond stocks that have hit 52-week highs, and identify companies now surpassing five solid years of outperformance. Which of these will thrash the market averages for another half-decade? Here are this week's leading contenders:
|
Company |
Recent Price |
CAPS Rating (out of 5) |
Bull Factor |
|---|---|---|---|
|
Ctrip.com (NASDAQ:CTRP) |
$72.19 |
**** |
96% |
|
Wipro (NYSE:WIT) |
$19.85 |
*** |
94% |
|
Cree (NASDAQ:CREE) |
$47.13 |
*** |
92% |
|
F5 Networks (NASDAQ:FFIV) |
$49.26 |
*** |
92% |
|
Amazon.com (NASDAQ:AMZN) |
$132.97 |
** |
72% |
Companies are selected from the "New 5-Year Highs" list published on MSN Money on Monday. CAPS ratings from Motley Fool CAPS.
"Everybody loves a winner"
So people tell me, but it might be more accurate to say: "Everybody loves a winner... that they own." No matter how great the company, once its price starts marching skywards, potential new buyers can get scared. With each of these stocks now cresting a five-year high, sticker shock may be coming into play.
Consequently, only one of these five stocks enjoys an above-average four-star rating on CAPS (and yes, it's one we already recommended in Motley Fool Hidden Gems -- Ctrip.com). But now, at five times the value that we first recommended it at four years ago, is Ctrip still worth the price of admission? Let's find out.
The bull case for Ctrip.com
mungovan48 introduced us to Ctrip.com back in April as the "[l]eading travel services firm in the world's largest country - and one of the fastest growing. Dominant position in a growing market."
Soon after, groversr01 called Ctrip:
... the gold standard for online travel in China. The middle class is growing larger as a result of the world buying their goods (Made in China). The next time you see Chinese tourists in your country, think about how they got there.
Taking a more numbers-oriented approach, tuckman52 pointed out last year that:
this company has no debt... Management seems open, and generally provides conservative estimates. I believe this company will grow 20%/year for at least the next five years.
That 20% per year sounds like a lot. But tuckman52 is not the only one thinking Ctrip's journey has only just begun. Up on Wall Street, the dozen or so analysts who make it their business to track of this company's fortunes actually believe Ctrip will post 25% earnings growth over the next five years.
But 25% growth from where? How much money is Ctrip making today, and is it enough to justify the price?
When all else fails, read the instructions
Like many Chinese companies -- Baidu (NASDAQ:BIDU), Shanda Interactive (NASDAQ:SNDA), and CNOOC -- Ctrip's earnings aren't exactly easy to decipher, at least on Yahoo! Finance. But if you dig enough through the actual filings (as I have), you'll eventually find the answer: $86.4 million. That's how much loot Ctrip produced over the last 12 months, enough to give the stock a monster P/E ratio of more than 57.
To me, that seems an awful lot to pay for the stock, whether it's growing at 20%, 25% -- even 30%. And while I readily admit that GAAP accounting numbers don't tell the whole story at Ctrip (for example, we know that last year, Ctrip generated free cash flow slightly in excess of its reported net income), I have to say that I don't see a whole lot of margin of safety in this stock. Hence, my advice would be to leave home without Ctrip.
Foolish takeaway
Of course, that's just my opinion. You are free to disagree -- and we even have a place for you to do so publicly. If you see a future for Ctrip, click on over to Motley Fool CAPS now, and tell us why.
