diff --git a/packages/shared/stub-components.js b/packages/shared/stub-components.js
index 6c44d17bc..f166ef1cf 100644
--- a/packages/shared/stub-components.js
+++ b/packages/shared/stub-components.js
@@ -3,9 +3,11 @@
 import Vue from 'vue'
 import { compileToFunctions } from 'vue-template-compiler'
 import { throwError } from './util'
-import { componentNeedsCompiling } from './validators'
+import {
+  componentNeedsCompiling,
+  templateContainsComponent
+} from './validators'
 import { compileTemplate } from './compile-template'
-import { capitalize, camelize, hyphenate } from './util'
 
 function isVueComponent (comp) {
   return comp && (comp.render || comp.template || comp.options)
@@ -40,14 +42,16 @@ function getCoreProperties (component: Component): Object {
     functional: component.functional
   }
 }
-function createStubFromString (templateString: string, originalComponent: Component): Object {
+function createStubFromString (
+  templateString: string,
+  originalComponent: Component,
+  name: string
+): Object {
   if (!compileToFunctions) {
     throwError('vueTemplateCompiler is undefined, you must pass components explicitly if vue-template-compiler is undefined')
   }
 
-  if (templateString.indexOf(hyphenate(originalComponent.name)) !== -1 ||
-  templateString.indexOf(capitalize(originalComponent.name)) !== -1 ||
-  templateString.indexOf(camelize(originalComponent.name)) !== -1) {
+  if (templateContainsComponent(templateString, name)) {
     throwError('options.stub cannot contain a circular reference')
   }
 
@@ -66,7 +70,10 @@ function createBlankStub (originalComponent: Component) {
   }
 }
 
-export function createComponentStubs (originalComponents: Object = {}, stubs: Object): Object {
+export function createComponentStubs (
+  originalComponents: Object = {},
+  stubs: Object
+): Object {
   const components = {}
   if (!stubs) {
     return components
@@ -103,7 +110,7 @@ export function createComponentStubs (originalComponents: Object = {}, stubs: Ob
         // Remove cached constructor
         delete originalComponents[stub]._Ctor
         if (typeof stubs[stub] === 'string') {
-          components[stub] = createStubFromString(stubs[stub], originalComponents[stub])
+          components[stub] = createStubFromString(stubs[stub], originalComponents[stub], stub)
         } else {
           components[stub] = {
             ...stubs[stub],
diff --git a/packages/shared/util.js b/packages/shared/util.js
index c68044467..cf1b3e374 100644
--- a/packages/shared/util.js
+++ b/packages/shared/util.js
@@ -9,7 +9,10 @@ export function warn (msg: string) {
 }
 
 const camelizeRE = /-(\w)/g
-export const camelize = (str: string) => str.replace(camelizeRE, (_, c) => c ? c.toUpperCase() : '')
+export const camelize = (str: string) => {
+  const camelizedStr = str.replace(camelizeRE, (_, c) => c ? c.toUpperCase() : '')
+  return camelizedStr.charAt(0).toLowerCase() + camelizedStr.slice(1)
+}
 
 /**
  * Capitalize a string.
diff --git a/packages/shared/validators.js b/packages/shared/validators.js
index da7cc7b65..bfecebca4 100644
--- a/packages/shared/validators.js
+++ b/packages/shared/validators.js
@@ -1,5 +1,10 @@
 // @flow
-import { throwError } from './util'
+import {
+  throwError,
+  capitalize,
+  camelize,
+  hyphenate
+} from './util'
 
 export function isDomSelector (selector: any) {
   if (typeof selector !== 'string') {
@@ -62,3 +67,10 @@ export function isNameSelector (nameOptionsObject: any) {
 
   return !!nameOptionsObject.name
 }
+
+export function templateContainsComponent (template: string, name: string) {
+  return [capitalize, camelize, hyphenate].some((format) => {
+    const re = new RegExp(`<${format(name)}\\s*(\\s|>|(\/>))`, 'g')
+    return re.test(template)
+  })
+}
diff --git a/test/specs/mounting-options/stubs.spec.js b/test/specs/mounting-options/stubs.spec.js
index bab14ccad..85487d3d9 100644
--- a/test/specs/mounting-options/stubs.spec.js
+++ b/test/specs/mounting-options/stubs.spec.js
@@ -314,15 +314,37 @@ describeWithMountingMethods('options.stub', (mountingMethod) => {
     expect(HTML).contains('No render function')
   })
 
-  it.skip('throws an error when passed a circular reference', () => {
-    const invalidValues = ['child-component', 'ChildComponent', 'childComponent']
-    invalidValues.forEach(invalidValue => {
-      const error = '[vue-test-utils]: options.stub cannot contain a circular reference'
-      const fn = () => mountingMethod(ComponentWithChild, {
-        stubs: {
-          ChildComponent: `<${invalidValue} />`
-        }})
-      expect(fn).to.throw().with.property('message', error)
+  it('throws an error when passed a circular reference', () => {
+    const names = ['child-component', 'ChildComponent', 'childComponent']
+    const validValues = [
+      '<NAME-suffix />',
+      '<prefix-NAME />',
+      '<cmp NAME></cmp>',
+      '<cmp something="NAME"></cmp>',
+      '<NAMEl />'
+    ]
+    const invalidValues = [
+      '<NAME />',
+      '<NAME   />',
+      '<NAME></NAME>',
+      '<NAME aProp="something"></NAME>',
+      '<NAME  ></NAME>'
+    ]
+    const error = '[vue-test-utils]: options.stub cannot contain a circular reference'
+    names.forEach((name) => {
+      invalidValues.forEach(invalidValue => {
+        const fn = () => mountingMethod(ComponentWithChild, {
+          stubs: {
+            ChildComponent: invalidValue.replace(/NAME/g, name)
+          }})
+        expect(fn).to.throw().with.property('message', error)
+      })
+      validValues.forEach((validValue) => {
+        mountingMethod(ComponentWithChild, {
+          stubs: {
+            ChildComponent: validValue.replace(/NAME/g, name)
+          }})
+      })
     })
   })