1-Star Stocks Poised to Plunge: Standard Pacific? (SPF)

1-Star Stocks Poised to Plunge: Standard Pacific?

Based on the aggregated intelligence of 160,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, homebuilder Standard Pacific (NYSE: SPF ) has received the dreaded one-star ranking.

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

Standard Pacific facts

Headquarters (Founded)	Irvine, Calif. (1986)
Market Cap	$615.8 million
Industry	Homebuilding
Trailing-12-Month Revenue	$1.1 billion
Management	CEO Kenneth Campbell, III CFO John Stephens
Return on Equity (Average, Past 3 Years)	(83.6%)
Compound Annual Revenue Growth (Over Past 3 Years)	(31.3%)
1-Year Return	176%
Cash/Debt	$577.5 million / $1.2 billion
Competitors	PulteGroup (NYSE: PHM ) D.R. Horton (NYSE: DHI ) Lennar

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 49% of the 592 members who have rated Standard Pacific believe the stock will underperform the S&P 500 going forward. These bears include AmericanArrogant and All-Star TMFDeej, who is ranked in the top 1% of our community.

Last month, AmericanArrogant built a convincing case against the stock:

We have an oversupply of housing. That's the problem with the housing market. ... Government bailouts can't fix that situation. They can delay the mess hitting the fan, and they have. But the date with the fan is still on the calendar. Don't get caught holding homebuilder stocks when the music stops.

In a pitch from a week ago, TMFDeej elaborates on that bearishness. Here's an excerpt:

Even with this recent surge in home sales, the level of inventory is still at a very high level historically speaking. As of March, the U.S. had 3.6 million homes on the market ... about 8.5 months worth. That month's supply will look even higher as sales begin to tail off as a result of the expiration of the tax credit.

And the level of inventory is still growing. If one looks at the likely defaults among those who are behind on their mortgage payments (nearly a quarter of the homeowners who haven't made a single payment in the last twelve months have yet to be foreclosed upon), the current inventory level balloons to over 7 million units and rising. ...

For the purpose of CAPS, I decided to short the most highly leveraged and most over-valued public builders.

What do you think about Standard Pacific, 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!

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool's disclosure policy always gets a perfect score.

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