5 Stocks in a Tailspin

Individual stocks can surge 10%, 25%, or even higher in a short period of time. And they can fall just as far, just as quickly. For example, shares of SanDisk (NASDAQ:SNDK) dropped more than 20% in a single day after a lackluster earnings release from the memory maker this week.

Big drops in share price can sometimes signal material defects or new risks. But at other times, they're simply pullbacks after a long run-up. Fortunately, we have Motley Fool CAPS, a great resource to help us understand the larger picture behind big price drops.

Is the sky falling?
CAPS contains more than just the crowd's opinions. Its best-performing members' votes count more in shaping each company's rating than do the picks of their poorer-performing peers. That way, investors can intelligently use the collective wisdom of more than 110,000 CAPS members to make better decisions.

We'll use CAPS's handy stock screening tool to quickly zero in on companies that have been slashed by at least 25% in the last four weeks, and which have a market cap greater than $100 million and a beta of less than 3. Here's a sample of stocks our CAPS screen returned:

Source: Motley Fool CAPS. Price change from June 27 through July 23.

ArthroCare
Investors showed little mercy when ArthroCare said it needed to restate financials because of some faulty sales calculations, sending shares down more than 40%. The restatement could reduce reported revenue by as much as $25 million in 2007 and up to $5 million from the first quarter of this year as well. With investors also concerned about higher legal expenses, shareholder lawsuits, and an informal SEC inquiry, it's no surprise to see 59% of the 287 CAPS members rating ArthroCare to underperform the market.

Clearwire
With a major reorganization underway and tight credit conditions in the market, wireless broadband service provider Clearwire’s shares haven’t been able to gain traction lately. Increased lease expenses and debt service hit the company for a $176.4 million loss in the first quarter.  Along with the deal to reform the company with components of Sprint Nextel, Clearwire has held back on launching new markets in order to conserve cash. All the moving parts and uncertainty about Clearwire's future has only 83% of the 374 CAPS members rating the company giving it the thumbs up.

ValueClick
Earlier this year, Web advertising firm ValueClick showed signs of life as it closed the door on a nine-month FTC investigation regarding deceptive marketing practices -- but it didn't last. Shares of ValueClick fell 20% a week ago yesterday when the company cut its revenue and earnings guidance for the year due to the weak economy. As painful as it has been for investors, many still see potential in the company by itself or even as a takeover target. Either way, a total of 95% of the 569 CAPS members rating ValueClick believe it will outperform the market.

Office Depot
Office Depot has been suffering for a while now due to lower small business spending and a depressed housing market. Most recently, the dour economic environment was blamed for same store sales that have dropped 9% in the second quarter. With many consumers deciding to go the bargain route and shop at places like Wal-Mart Stores (NYSE:WMT), CAPS members are split as to when fortunes will turn around for the office supply chain. As such, a less-than-unanimous 341 out of 396 CAPS members rating Office Depot expect it to outperform the market.

Interactive Intelligence
Interactive Intelligence expects to report second quarter earnings results $0.03 to $0.05 per share below Wall Street's earlier expectations next week. The company is having a tough time getting customers to commit the high up-front cost for its call center software, even though it will save more money over time.. But with its shares down some 60% this past year, some investors smell a stock on sale. A solid contingent of CAPS members see it that way, too, with 95% of the 364 members rating Interactive Intelligence expecting it to outperform the S&P going forward.

Ultimately, whether or not you believe a fall in any stock is warranted, your own research is more important than collective opinions. CAPS can help you quickly focus your due diligence, and even point out potential pitfalls you may not have seen.

Add your take on these or any of the 5,500 stocks that 110,000-plus members have covered in Motley Fool CAPS. It's totally free to be a part of the community, and the payback is more than worth it.