The market’s rough patch has recently knocked many stocks from their 52-week highs. Even the companies that are performing well are drifting ever lower, but the companies that have dared to stumble this spring are really taking a beating. One false move and they wake up to a share price  30% to 40% lower than it was when spring began.

Retail stocks have taken it especially hard, many of them dropping 15% to 20% in recent weeks. In fact, the retailers in the table below have dropped 30% or more since the beginning of spring. Companies such as Big 5 Sporting Goods (Nasdaq: BGFV) and CitiT rends Inc. (Nasdaq: CTRN) built impressive growth platforms before the downturn hit. Now that their shares have been so deeply punished, they’re worth a closer look.

 
Looking beyond retail, a host of other stocks posted their biggest drops in several years. I’ve recently written about Exide Technologies (Nasdaq: XIDE), which you can read about here. I also discussed A123 Systems (Nasdaq; AONE), which has recently been upgraded to “buy” by Goldman Sachs and JP Morgan. Lastly, I suggested MEMC Electronic Materials (NYSE: WFR) may have been oversold. There are a few other stocks whose shares have dropped 30% to 40% in the past 13 weeks.

Take a look at the table below…
 


Among these names, I’ve identified a pair of deeply-discounted stocks that are looking forward to the official end of spring in hopes to see sunnier days in the upcoming quarter.

#-ad_banner-#Clayton Williams Energy (Nasdaq: CWEI)
Shares of this oil and gas driller have been on a wild ride, surging from $40 in June 2010 to more than $100 in the end of March 2011 before plunging back below $60 on June 15. Shares were driven higher as the driller was able to expand output just when prices for crude oil were surging. This helped cash flow per share to rise from about $8 in 2009 to $17 in 2010. This year, this figure is expected to approach $20 in 2011 and $24 in 2012.

Trouble is, the company may need to raise more money (and dilute existing shareholders) to fulfill its ambitious expansion plans and meet those targets. In a recent press release, Clayton Williams noted it intends to spend nearly $500 million in 2011 to fulfill its expansion plans. The company recently issued $50 million in new bonds that are due in 2017, while retiring $81 million in bonds that would have come due in 2013. So it’s unclear from where the rest of its needed funds will come.

Even if Clayton Williams is unable to fund an expansion and meet those lofty targets, it still controls an impressive set of proven oil fields worth $68 a share according to analysts at Imperial Capital. This is roughly 20% above the current share price. If you look at it another way, the shares trade for just four items projected 2011 cash flow, on an enterprise value basis. That’s roughly 20% to 30% below peer multiples.

With shares in decline, management may need to adjust expansion plans and focus their efforts on existing drilling activities. This means the growth plans for 2012 and 2013 may not be met, but it would allow the company to build cash reserves and restore investor confidence in the company’s projected financial strength. One thing is for sure: shares have more than discounted potential balance sheet and dilution concerns and appear quite inexpensive below $60.

Stratasys (Nasdaq: SSYS)
This is a company that has always been a bit ahead of its time. Its machines can create 3-D objects used as design prototypes or spare parts replacements in a wide number of fields. The technology it uses has been quite impressive, but customer growth in the past few years has not. Sales peaked at $124 million in 2008 (even though many thought Stratasys would have far higher sales by now back when the company first made the rounds on Wall Street in the 1990s).

Yet toward the end of 2010, Stratasys finally started to click when sales growth accelerated and a slow-starting partnership with Hewlett-Packard (NYSE: HPQ) started to blossom. Shares rose from about $10 in the summer of 2008 to $55 on April 27 this year. Since then, it’s been a downhill slide and shares are back to a little more than $30.

Why the pullback? Blame it on HP. The tech giant has reportedly been pleased with initial sales of rebranded 3-D printers in five European countries, but has yet to expand the relationship. The relationship had been seen as a panacea for Stratasys, whose limited sales force has always been an impediment to growth.

Even without an expansion in the HP relationship, Stratasys is indeed on the upswing. The company never earned more than $0.66 a share in any given year, but now appears on track to earn almost $1 a share this year and perhaps $1.25 in 2012 on 20%-plus sales growth. The recent pullback puts the forward multiple at about 25 — not cheap, but down from where it was when spring began.

In addition, HP is still likely to deepen its partnership with Stratasys to include more countries, with a potential announcement coming later this summer. It increasingly looks like any HP expansion will provide a solid lift to Stratasys’ sales, but it may not be the game-changer relationship many had hoped for when the stock ran up this past winter. Nevertheless, the stock’s pullback allows investors a second shot at an appealing (if long overdue) growth story.

Action to Take –> Summer begins on June 21, and these two companies will welcome the change of seasons. In some ways, the recent bruising of shares appears overdone, so a summer rebound may be in the offing. For investors who like to take advantage of undervalued situations, these two stocks seem like a promising play to start the new season.