1-Star Stocks Poised to Plunge: Barnes & Noble?

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, book retailer Barnes & Noble (NYSE: BKS  ) has received the dreaded one-star ranking.

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

Barnes & Noble facts

Headquarters (founded) New York (1986)
Market Cap $731.8 million
Industry Specialty stores
Trailing-12-Month Revenue $7.1 billion
Management Founder/Chairman Leonard Riggio
CEO William Lynch
Trailing-12-Month Return on Equity (7.5%)
Cash/Debt $27.4 million / $251.6 million
Competitors Amazon.com
Apple
Books-A-Million

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

On CAPS, 53% of the 631 members who have rated Barnes & Noble believe the stock will underperform the S&P 500 going forward.

Just last month, one of those Fools, NJ7, summed up the bear case for our community:

[Barnes & Noble] has been consistently losing money and missing estimates for at least two years, with an overall downward trend in earnings. While its debt to equity is decent, its current ratio is 1. ... The biggest problem for Barnes and Nobles is that the national bookstore chain is likely an endangered species, unless B&N can undercut Amazon and other online retailers' prices. I can obtain books frequently for >10% less from Amazon, and Amazon has a much greater selection. While the Nook was a good move, there is so much competition in the eReader business that B&N may well fail to profit from this. The bottom line is, the physical bookstores are a tremendous drag on B&N, with a huge amount of space to maintain ... Local bookstores with novelty items and a devoted clientele also are piling on, leading me to conclude that B&N will continue to head down.

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Amazon and Apple, as well as creating a bull call spread position in Apple. 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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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 April 05, 2012, at 10:56 AM, leonhart03 wrote:

    Yeah, I wouldn't really consider Apple as a major competitor in the book arena. They don't have anywhere near the ebook selection in their iBooks catalog. And BAMM has actually been a strategic partner selling the Nook, so they can't quite be called a 100% competitor, either. So, it's really just down to Amazon to continue the showdown. They both have great devices, and each have their own advantages. Personally, I'd rather pay 10-15% more for my books through a company that provides nearby portals where I can get good customer service. For example, when the book I ordered comes missing 10 pages, I like being able to walk into the store and getting it replaced with a complete copy, granted they have it on the shelf at the time. If not, well then I saved the 30 minute hold time getting the overseas customer service to replace my book in a few days.

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