Lowering guidance can bring on a world of pain for a company. Not only does the stock take a hit when the news is announced, but it can also continue to fall for quite a while afterwards. Investors face a dilemma: Is it time to join the mad dash for the exits, or are they faced with a buying opportunity in disguise?

A guide to the future
It's not always easy to tell whether your company is having a fire sale or burning down. With the help of Motley Fool CAPS, however, understanding the difference is now a whole lot simpler.

The Foolish investor-intelligence database compiles the opinions of more than 110,000 professional and novice investors about stocks they think will outperform the market and those they think will not. Research shows that four- and five-star-rated stocks offer you a better chance of beating the market than lower-rated ones do. A high CAPS rating with lowered guidance could present you with a real deal.

Here are five companies that have recently guided lower, coupled with what CAPS investors think:

Company

Period

Analyst Est./Previous Guidance

Updated Guidance

CAPS Rating (out of 5)

Himax Technologies (NASDAQ:HIMX)

Q3 2008

$0.14

$0.04-$0.06

*****

Midway Games (NYSE:MWY)

Q3 2008

($0.19)

($0.37)

*

OraSure Technologies (NASDAQ:OSUR)

Q3 2008

($0.06)

($0.09)

***

Vulcan Materials (NYSE:VMC)

FY 2008

$3.29

$2.85-$3.25

***

Whole Food Market (NASDAQ:WFMI)

FY 2009

$1.52

$1.08-$1.14

***

Sources: Briefing.com, Motley Fool CAPS.

Now, this isn't a list of stocks to buy or sell short. Things rarely work all the time in investing, so treat this as a list for further research.

A short-circuit
LCD screen chip maker Himax Technologies is the main supplier to one of the largest display manufacturers you've never heard of. Chi Mei Optoelectronics is the world's fourth largest LCD panel maker, behind Samsung (another customer), AU Optronics (NYSE:AUO), and LG Display. It accounts for nearly 60% of Himax's revenue, and in the recent earnings release, Himax reported that customers were cutting back on their LCD production as a result of economic conditions here.

As much as that brings short-term contraction for Himax's own output, the company's position within the Taiwan LCD market should help it realize benefits from the greater production that may open up in China. Right now, Taiwanese companies are able only to perform final assembly in China on panels produced elsewhere. The government, though, is thinking about lifting the ban on production in China, a move that might induce display makers to erect production facilities there.

Investors look at the hit Himax's stock took upon the lowered guidance. Rather than be concerned, they've seemed uniformly in agreement that the stock was offering a buying opportunity. CAPS member ChazzReinhold finds the chipmaker's position to be solid for when the market turns:

As clients such as Samsung [reiterate] to HIMAX the current slowdown of consumer spending, specifically in the flat-panel LCD market, this results in companies such as Samsung reducing flat-panel inventory and, therefore, reducing the drivers it purchases from HIMAX. To put it simply. However, once this [economy] turns and consumer spending starts to grow at a healthy clip, HIMAX seems to be in a solid position to take advantage, i.e. no debt, growing market share, [growing] margins. Doesn't hurt that iSuppli ranked them the #1 display driver for large sized TFT-LCD panels.

Maybe call it "Half Market"
Organic-foods purveyor Whole Foods didn't get cut in half by its recent earnings report, but it has seen its value fall by half over the past year. Food is one of those recession-resistant markets -- you gotta eat, right? -- but that doesn't mean you need to pay the higher tab associated with organics. Moreover, when you can buy your wholesome fare at the same time you're picking up your other groceries at the local Safeway (NYSE:SWY), it's easy to see why Whole Foods found it necessary not only to reduce guidance but also to cut back expansion plans and discontinue its dividend.

CAPS member seekwisdom1 contends, though, that the quality Whole Foods offers is simply not conveniently available elsewhere: "All I know is that once you start shopping there, you don't want to stop ... very high quality stuff that is almost impossible to find ALL-IN-ONE PLACE elsewhere! When your body feels better eating this stuff, it's hard to want to shop elsewhere ... the cost, taste, and time savings seem worth the cost ... hoping a healthy proportion of consumers see it likewise ..."

Guide on!
Looking at stocks whose shares have taken a dive on diminished outlooks can be a painful experience. It pays to start your own research on these stocks at Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made all from a stock's CAPS page. Your input, though, can help guide other investors to higher prospects for growth even in the face of lower guidance. Head to CAPS now, and let your voice lead the way.

Whole Foods Market is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.