1-Star Stocks Poised to Plunge: RadioShack?

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, embattled electronics retailer RadioShack (NYSE: RSH  ) has received the dreaded one-star ranking.

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

RadioShack facts

Headquarters (founded) Fort Worth, Texas (1899)
Market Cap $288.4 million
Industry Computer and electronics retail
Trailing-12-Month Revenue $4.4 billion
Management CEO James Gooch (since 2011)
CFO Dorvin Lively (since 2011)
Return on Equity (average, past 3 years) 10.9%
Cash/Debt $517.7 million / $679.3 million
Competitors Amazon.com
Best Buy
Wal-Mart

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

On CAPS, 47% of the 883 members who have rated RadioShack believe the stock will underperform the S&P 500 going forward.

A couple of months ago, one of those Fools, chinamantsan, succinctly summed up the bear case for our community:

Retail stores are slowly getting killed by the Internet. Yes there will always be a need for [brick and mortar] stores but if you walk into a RadioShack you will really wonder how they have stayed in business for so long. ...

I have been to very many RadioShacks and I will have to say that 99% of the employees that work there don't know a thing about the products they are selling and I will generally have to track down the item myself because nobody knows where to find it. ...

I personally wouldn't buy one share of RadioShack stock and I can definitely see them going out of business within the next few years the same way Circuit City went out.

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of RadioShack, Amazon, and Best Buy. Motley Fool newsletter services have recommended buying shares of Amazon. 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.


Read/Post Comments (3) | Recommend This Article (1)

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 September 12, 2012, at 1:49 AM, afoolsfriend wrote:

    Radio Shack is an American Company that is at a crossroad in this game of brick and mortar type of electronics businesses, HOWEVER to kick a man when he's down or dog piling on a wounded American Co. is not the path to recovery, Shouldn't we rally around a business that has stood the test of time? (100 years!) Yes, there are young people who are not as savvy as a seasoned hobbyist that will be able to answer ALL questions asked, but COME ON these folks are showing up on a daily basis (making minimum wage) trying to be available to cater to everyone walking through those doors with the best of intentions to offer a SERVICE that you won’t have on the internet. We need to have patience and support this American Company that employs Americans.

  • Report this Comment On September 12, 2012, at 12:32 PM, rharris111 wrote:

    After reading this article I went and checked out the fundamentals because in my mind Radio shack fills a retailing niche in smaller towns across the country where the towns don't have a Walmart or Best Buy. And in bigger towns they compete against the corner cell phone shop more than they do against best buy or Amazon. They are small convenient and quick to get in and out of. In the last several months they have begun to expand the number of items they stock on their website and have very competitive pricing listed in all the shopping engines for tablets, phones and other gadgets -- it is where I bought my Android tablet. The downside is their web listing quality -- descriptions and images aren't up to Amazon quality yet but getting better.

    But worried about a plunge in their stock price? Really? -- it's trading in the ~2 buck range and the company has a solid business that gushes cash from operations. It is nothing like Circuit city that bled cash for years and years and was loaded with debt. One bad quarter does not a bankruptcy make. The biggest threat to the company isn't Amazon or Best Buy the biggest threat is that the company is being hunted by private equity buyers. Their stock price is being manipulated by private equity to gain access to their substantial cash and relatively small debt load by pushing down the price to ridiculous levels. They want to buy the company on the cheap, plunder the cash and then load the company up with debt and refloat it to investors a year or two later as being a lean mean company. Watch the order book during the day on the company and keep an eye on who owns their debt. They are trying to squeeze the company so they can not access the debt and equity markets to force them to sell. If you look at all the stock websites like Fool.com the postings are slim on details except to mention scary things like Circuit City and competition from Amazon. Big Deal, Niches are the most profitable place to be and they are square center. I don't currently own RSH but intend to load up on every dip.

  • Report this Comment On September 13, 2012, at 5:58 PM, bagamery wrote:

    any chain that is within five miles of 90% of the american population should not be let to die--

    handy handy handy----no parking lot the size of central park--3 block wallk to the front door--- come on guys lets support a company that is older than our grandpaarents joseph

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