2-Star Stocks Poised to Plunge: New Oriental?

Based on the aggregated intelligence of 145,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, Chinese education services provider New Oriental Education and Technology Group (NYSE: EDU  ) has received a distressing two-star ranking.

With that in mind, let's take a closer look at New Oriental's business and see what CAPS investors are saying about the stock right now.

New Oriental facts

Headquarters (Founded)	Beijing (1993)
Market Cap	$2.7 billion
Industry	Diversified consumer services
Trailing-12-Month Revenue	$324 million
Management	Founder/CEO Minhong Yu CFO Louis Hsieh
1-Year Return	41%
Cash/Debt	$368 million / $0
Other Low-Rated Education Stocks	Apollo Group (Nasdaq: APOL  ) Strayer Education (Nasdaq: STRA  )
CAPS Members Bearish on EDU Also Bearish on	Direxion Shares ETF Trust Large Cap Bull 3X (NYSE: BGU  )
CAPS Members Bullish on EDU Also Bullish on	Ctrip.com (Nasdaq: CTRP  ) China Mobile (NYSE: CHL  ) Apple (Nasdaq: AAPL  )

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 36.5% of the 274 All-Star members who have rated New Oriental believe the stock will underperform the S&P 500 going forward. Among the entire bear population are dexion10 and mrindependent, who is ranked in the top 2% of our community.

Earlier this month, dexion10 pointedly schooled Fools on what a risky situation looks like: "[A] chinese stock that teaches english at a ridiculous valuation - above private sector transactions in its space - while the industry approaches saturation and as the US dominance is ending... and you want a thesis from me really."

In a pitch from last week, mrindependent, following the lead of short-selling website Citron Research, also urged investors to skip out on the stock:

New Oriental Education teaches english in China. This company is profitable and growing but its valuations are stratospheric at 36 times trailing p/e and 7 times book value. Citron Research asserts that new competitors are emerging and barriers to entry are minimal. Thus, margins and profitability will decline.

What do you think about New Oriental, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. The CAPS community is waiting to hear your opinions. CAPS is 100% free, so get started!