Get Ready for the Bounce

"Don't catch a falling knife," as the old saw commands. (Pardon my mixing cutlery metaphors.) The idea of buying a former superstar stock at a discount price certainly has its attractions, but you've got to make sure you catch the haft -- not the blade. That's where Motley Fool CAPS comes in.

It's been a while, but thanks to last week's sell-off, we once again have a chance to stand beneath Mr. Market's silverware drawer in hopes of snagging a bargain. Let's meet today's contenders:

Company	52-Week High	Recent Price	CAPS Rating (out of 5)
Emergent�BioSolutions (NYSE: EBS  )	$26.41	$14.89	*****
Arch Coal (NYSE: ACI  )	$36.99	$12.89	****
Patriot Coal (NYSE: PCX  )	$27.56	$6.89	***
Savient Pharmaceuticals (Nasdaq: SVNT  )	$11.91	$2.00	***
Radio Shack (NYSE: RSH  )	$16.70	$6.95	**

Companies selected from the list of stocks hitting new intraday 52-week lows as reported on finviz.com. Recent price and 52-week high provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

The week in weak stocks
The Dow hit 13,000 last week, and there was much rejoicing. Not everyone was drinking champagne and throwing tickertape, however. Up above, you see the names of five stocks that marked the Dow's milestone by hitting new records of their own -- record lows. Radio Shack and Savient Pharma, Arch Coal, Patriot Coal, and Emergent BioSolutions -- each and every one of them is now sitting at a new 52-week low. So what went wrong?

Radio Shack has been struggling ever since the company preannounced weak Q4 earnings back in January. The straw that broke the stock's back, though, came last week when S&P blasted the Shack for "poor operating and financial performance" and downgraded its already junk-rated debt to "B+" -- with a note that the company's outlook is "negative" and subject to further hacking.

Savient, in contrast, fell to a new low despite receiving a bit of positive news. Analysts at William Blair initiated the stock at "buy" despite the company's having just reported a worse-than-expected Q4 loss.

And back on the flipside, Arch Coal and Patriot Coal both received new "reduce" ratings from analysts at Nomura. In a wide-ranging report on America's coal industry, Nomura singled out Arch and Patriot as its two favorite "high-conviction short ideas." (Gee, thanks, Nomura!)

And last but not least, we come to the 52-week-low hitter than Fools favor most: the five-star-rated Emergent BioSolutions. Recipient of neither upgrade nor downgrade last week, Emergent-Bio is expected to report earnings on Thursday, so news of some sort should be arriving soon. Should you buy before it happens? Let's see what our Fool community has to say on the matter.

The bull case for Emergent BioSolutions
Analysts covering EBS are looking for the company to report something on the order of $275 million in annual revenues this week, and $0.57 per share in profits (about $20.5 million net) for 2011. CAPS All-Star zzlangerhans, however, thinks EBS can do quite a bit better than that, with "revenues of 320M to 340M, with net income of 35M to 45M." Of course, EBS's most recent guidance was for $280 million in revs, and $20 million in earnings ... so hitting the kind of numbers zz is looking for will take some doing.

Longer-term, however, lots of Fools still expect to see EBS perform well. Ace investor EnigmaDude, for example, reminds us that "Emergent BioSolutions receives award to supply 44.75 million doses of BioThrax to U.S. Government over five Years for a total value of up to $1.25 billion." TrojanFan points out that EBS has also received approval for its anthrax vaccine from the "Singapore HSA."

Speaking of anthrax (and why wouldn't we want to stick with such a pleasant subject?), the U.S. government contract looks big enough to satisfy the vast majority of Wall Street's revenue expectations and maintain EBS's current annual revenues all on its own over the next five years. But, in fact, EBS is hard at work developing multiple anthrax products in addition to BioThrax. It's also working up new vaccines for tuberculosis, typhoid, and pandemic flu -- and multiple other therapies to boot, any one of which could spark additional earnings growth at EBS.

Foolish final thought
Personally, I wouldn't mind seeing a bit of free cash flow to go along with EBS's "earnings" growth. (Right now, Emergent BioSolutions is showing negative free cash flow for the trailing 12-month period.)

Analysts who follow EBS, however, are focusing on an expectation for long-term earnings growth of 45% annually, which is not bad for a stock that costs just 25 times earnings. Assuming management does nothing to dispel such rosy predictions in this week's earnings guidance, I see plenty of opportunity for the stock to bounce back on Thursday.

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