Rocket Stock or Dud?

"The bigger they are, the harder they fall." It's the worst nightmare of every investor in today's market -- buying a rocket stock just before it takes a nosedive.

Now I readily admit that sometimes, stocks rise for a reason. But sometimes, the rise becomes the reason. No matter how often we caution them not to, investors do have a habit of buying hot stocks, and trusting momentum to keep 'em moving upward.

Problem is, if the price goes up too much, even a great company can turn into a lousy investment. Below I list a few stocks that may have done just that -- stocks that, according to the smart folks at finviz.com, have more than doubled over the past year and just might be ripe to fall back to earth.

Companies are selected by screening for 100% and higher price appreciation over the last 12 months on finviz.com. Current pricing provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

Since the darkest days of early 2009, a change has come over the markets. People are starting to talk more about an economic recovery and less about the end of civilization as we know it. And with the renewed economic optimism, stocks are on the march (up) once again.

Each of the five companies named above sports a stock price at least twice what it was one year ago -- and if you ask the 150,000-plus investors on CAPS, these stocks aren't done rising yet. Our chart is chock-full of four-star prospects, and we even have a bona fide five-star this week. Let's find out more about it, as we dive right into ...

The bull case for UnitedHealth Group
Will Obamacare destroy America? Will it doom the insurance industry? CAPS member reemiep answers with a resounding "No": "HEALTH CARE REFORM WILL NOT HAVE A NEGATIVE IMPACT [on UnitedHealth]. IT WILL … RESULT IN A SIGNIFICANT INCREASE IN MEMBERSHIP, hIGHER REVENUES AND STEADY OR INCREASED PROFIT PERFORMANCE." (No need to shout, reemiep. We hear you.)

Next up, and using his inside voice, CAPS All-Star Jeffreyw predicts that "no matter what legislation results, these guys will be providers and find ways to do it profitably, becoming the [Wal-Mart (NYSE: WMT)] of health care ... not sure that's good for patients, but it is for investors!"

And if you ask vballsmith, in the worst-case scenario, "National Health care won't be as hurtful to these guys as originally thought ... Nothing's going to happen until at least 2013 and [UnitedHealth] has 3 years of profits to earn." This CAPS member concludes: "I would own this stock purely on valuation."

It's easy to see where vballsmith is coming from with this assessment. UnitedHealth sells for a price-to-earnings multiple of only 10.2. That's not as cheap as WellPoint's (NYSE: WLP) 6.3 P/E, of course. Then again, UnitedHealth isn't suffering from the same bad press WellPoint has endured of late. More importantly, 10.4 times earnings is not an unreasonable price to pay, relative to consensus forecasts for annualized 8.5% five-year growth at UnitedHealth.

And from there, the picture only gets better. Free cash flow for the past 12 months comes to $4.9 billion. That's roughly 30% higher than UnitedHealth reports as its net income, and it's enough to give this stock a very cheap-sounding valuation: just 8 times free cash flow.

Time to chime in
Is that cheap enough to justify sailing the choppy waters of government health-care reform? I think it is, but that's not the point.

The point here is that we want to know what you think about UnitedHealth. Will it survive Obamacare? Will it, in fact, prosper from it, as reemiep contends? At Motley Fool CAPS, we report, but you decide.