1-Star Stocks Poised to Plunge: BJ's Restaurants?

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, casual dining restaurant operator BJ's Restaurants (Nasdaq: BJRI  ) has received the dreaded one-star ranking.

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

BJ's facts

Headquarters (Founded)

Huntington Beach, Calif. (1991)

Market Cap

$1.26 billion

Industry

Restaurants

Trailing-12-Month Revenue

$582 million

Management

Chairman/CEO Gerald Deitchle
CFO Gregory Levin

Return on Equity (Average, Past 3 Years)

7.4%

Cash/Debt

$40.3 million / $0

Competitors

Brinker International
Buffalo Wild Wings
Darden Restaurants

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 23% of the 181 members who have rated BJ's in believe the stock will underperform the S&P 500 going forward.

Earlier this week, one of those Fools, All-Star BuffettJunior1, tapped BJ's as an unsatisfying opportunity:

Seriously people! If you had the money to buy the whole business would you? I just don't think that a business with terrible cash flow, almost nonexistent profit margins, and awful return on capital is worth $1.3 billion. The assets on the balance sheet also don't justify this extreme valuation, since the majority of the assets are just restaurants, which would sell for a significant discount if the company were to liquidate its assets.

Overall, this is just a terrible business! The current valuation is extreme to say the least. This stock needs to drop at least 70% to make it even close to reasonable.

What do you think about BJ's, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!

Want to see how well (or not so well) the stocks in this series are performing? Follow the new TrackPoisedTo CAPS account.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of Buffalo Wild Wings. Motley Fool newsletter services have recommended buying shares of Buffalo Wild Wings. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 20, 2012, at 3:27 AM, MaryAnnEvans wrote:

    Pretty funny--Zacks gave BJRI a strong buy yesterday. Your suggestion of assets being only restaurants and raising the specter of liquidation seems a bit silly given $40 m cash and no debt. Somebody clearly is a fool. I just can't tell who. I'd settle for overvalued, but cash flow appears to be dependable and increasing in volume if not ROE.

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