4-Star Stocks Poised to Pop: Rosetta Stone

Based on the aggregated intelligence of 165,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, language learning software specialist Rosetta Stone (NYSE: RST  ) has earned a respected four-star ranking.

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

Rosetta Stone facts

Headquarters

Arlington, Va.

Market Cap

$378.5 million

Industry

Multimedia and graphics software

Trailing-12-Month Revenue

$269.2 million

Management

CEO Tom Adams (since 2003)

Chief Product Officer Gregory Long (since 2006)

Return on Capital (average, past 2 years)

12.8%

Cash/Debt

$100 million / $0

Competitors

Disney Publishing Worldwide (a subsidiary of Walt Disney (NYSE: DIS  ) )

McGraw-Hill (NYSE: MHP  )

Blackboard (Nasdaq: BBBB  )

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

On CAPS, 93.6% of the 609 members who have rated Rosetta Stone believe the stock will outperform the S&P 500 going forward. These bulls include Foolm2 and All-Star TMFMuse, who is ranked in the top 5% of our community.

Late last month , Foolm2 advised Fools to pounce on Rosetta Stone's sliding stock price: "The recent drop gives us a great buy point for this growing company. The economy will recover and the international sales will grow even more."

Driven by a pair of high-profile management exits and disappointing domestic sales, Rosetta Stone's shares are down 24% over the past two months alone. Of course, with its international sales rising 155% in the last quarter, and a new higher-priced Internet-based product set to launch, Rosetta Stone isn't exactly doomed. While Disney, McGraw-Hill, and Blackboard offer competing products, our community strongly believes that Rosetta Stone has become the standard language learning tool in consumers' minds. Add the fact that those same rivals are much larger and have their tentacles in several other businesses, and it's easy to see why Fools tap Rosetta Stone as the strongest and purest way to play the world's ever-growing need to communicate with each other.

CAPS All-Star TMFMuse explains:

This company plays in a space that makes sense for growth in an ever-globalizing economy, but does not seem to carry any real international risk. The need for foreign languages in business (as well as modern life in general) is increasing, regardless of the ebb and flow of the global economy.

[Rosetta Stone] offers a complete, simple, scalable solution for language-learning. Their entry level packages are reasonably priced, and their back-end products are smart and enticing. ... And while there are competitors, [Rosetta Stone] has decent moat (brand recognition, network effect, switching costs, etc.) -- I don't see anyone more innovative in that space.

What do you think about Rosetta Stone, or any other stock for that matter? If you want to retire rich, you need to put together the best portfolio you can. Owning exceptional stocks is a surefire way to secure your financial future, and on Motley Fool CAPS, thousands of investors are working every day to find them. CAPS is 100% free, so get started!

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Rosetta Stone is a Motley Fool Stock Advisor pick, and Motley Fool Options has recommended writing puts on it. Blackboard is a choice of both Stock Advisor and Hidden Gems. Walt Disney is an Inside Value and Stock Advisor selection. Try any of our Foolish newsletter services free for 30 days.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy.


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