2-Star Stocks Poised to Plunge: Conn's?

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, home appliances and consumer electronics retailer Conn's (Nasdaq: CONN  ) has received a distressing two-star ranking.

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

Conn's facts

Headquarters (founded) Beaumont, Texas (1890)
Market Cap $522.8 million
Industry Computer and electronics retail
Trailing-12-Month Revenue $801.2 million
Management CEO Theodore Wright (since December 2011)
CFO Brian Taylor (since April 2012)
Return on Equity (average, past 3 years) (0.1%)
Cash/Debt $6.7 million / $298.1 million
Competitors Best Buy
Sears, Roebuck & Co.
Wal-Mart Stores

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

On CAPS, 13% of the 335 members who have rated Conn's believe the stock will underperform the S&P 500 going forward.

Just last week, one of those Fools, jed71, succinctly summed up the bear case for our community:

This company relies on folks with crappy credit to come in and purchase appliances / mattresses on credit. This type of consumer loan is called PMSI (purchase money security interest) -- and it comes with much higher risks and default rates. ... Most of these terms have a hidden cost to consumers, which many do not fully understand. Conn's is getting themselves back into the same situation they were in during late 2008 / early 2009. ... You can see their cash from operations balances beginning to decline (quarter over quarter). I would be careful with this one -- if the US economy continues to falter, this one will fall fast and hard.  

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool owns shares of Best Buy. Motley Fool newsletter services have recommended creating a bull call spread position in Wal-Mart. 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

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  • Report this Comment On July 12, 2012, at 12:33 PM, blendersoup wrote:

    I don't see the drop in cash from operations from quarter to quarter. Can you provide the detail?

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