3 Stocks Near 52-Week Highs Worth Selling: Regions Financial Corporation (RF), Barclays PLC (ADR) (BCS), Cree, Inc. (CREE)

Someone dim these lights
Every once in a while an idea comes along that makes a lot of sense, but the underlying valuation of that company does not. This would be a perfect description for LED bulb company Cree, Inc. (NASDAQ:CREE) which just boosted its quarterly sales forecast to a range of $335 million to $350 million from $325 million to $345 million, and announced that it was introducing a new energy-saving LED for just $9.97.

On the surface, this looks like it could be a big seller for Cree, with consumers switching from standard incandescent light bulbs to very affordable energy-saving bulbs from Cree, Inc. (NASDAQ:CREE). However, the magnitude of extra sales I’d expect Cree to get is pretty nominal relative to the $900 million in market value Cree has tacked on since it announced this news on Tuesday. Based on Cree’s and analyst estimates, Cree, Inc. (NASDAQ:CREE)is expected to grow sales by 17% in each of the next two years, but is valued at a smidge over 30 times forward earnings. With a PEG ratio near 2, it’s difficult to assume Cree will head higher.

Given Cree, Inc. (NASDAQ:CREE)’s shaky earnings history that has seen it miss the Street’s estimates in five of the past nine quarters, I’d suggest taking this recent rally as the perfect time to exit stage left.

Foolish roundup
This week’s theme is all about realistic expectations. It’s not too far-fetched to assume that the mortgage insurance industry is improving, that supply chain management demand is growing, or that LED demand is rising. What is difficult to imagine are the valuations on all three companies persisting with all three having a sketchy earnings history at best.

The article 3 Stocks Near 52-Week Highs Worth Selling originally appeared on Fool.com and is written by Sean Williams.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool has no position in any of the stocks mentioned.

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