RadioShack (NYSE: RSH) faces some long odds of being a successful long-term investment. But to better understand just what its chances are, we need to ask what risks the company faces.
To help answer this question, check out our new premium report on RadioShack. For a taste of what's offered inside the report, read the following excerpt that discusses RadioShack's risks.
The risks are evident for any investor: Can the company survive and thrive, or will it continue its steady descent?
Further revenue declines at RadioShack could signal to investors to head for the exits. As Best Buy moves to smaller-format stores, this traditional big box retailer could steal part of RadioShack's traditional territory. RadioShack's stockpile of cash would burn up, and less cash flow could crimp the company's ability to pay debts -- even the newly refinanced debt that is at an 11% interest rate. And unfortunately, ratings on the company's debt keep falling further into "junk" status, which will likely keep raising the interest rates RadioShack will pay for any loans.
Profit margins will also be critical for investors to watch. The company dropped into negative profit-margin territory this year, which can only last for so long. Even if RadioShack can keep convincing customers to pay for its products and services, the company will still lose money from inefficiencies within the business and lower-margin products, no matter how much it brings in.
The financial risk for RadioShack is clear; however, it also has a large management risk. If the company fails to find the right CEO to lead it to profitability and management, this new hire could be its last CEO. The board made the right decision to oust former CEO Gooch, but it must also make the right decision for his replacement: someone with experience in turnarounds, rebuilding a brand, and customer service.
More in-depth analysis available
That was a sample of what is available in our thorough premium report on RadioShack. As RadioShack faces a different store mix, new management, and the chance of a collapsing business, our report breaks down the most pertinent information for investors. It is completed with updates on the latest news and analysis for RadioShack. For your copy, click here now.