2-Star Stocks Poised to Plunge: TRW Automotive?

Based on the aggregated intelligence of 160,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, auto systems supplier TRW Automotive (NYSE: TRW  ) has received a distressing two-star ranking.

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

TRW Automotive facts

Headquarters (Founded)

Livonia, Mich. (1904)

Market Cap

$3.7 billion


Auto parts and equipment

Trailing-12-Month Revenue

$12.8 billion


CEO John Plant (since 2003)

CFO Joseph Cantie (since 2004)

Return on Equity (Average, Past 3 Years)


Compound Annual Revenue Growth (Over Past 3 Years)


1-Year Return



Autoliv (NYSE: ALV  )

Eaton (NYSE: ETN  )

Illinois Tool Works

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

On CAPS, 30% of the 183 members who have rated TRW Automotive believe the stock will underperform the S&P 500 going forward. These bears include robertshrestha and All-Star JakilaTheHun, who is ranked in the top 1% of our community.

Just yesterday, robertshrestha said TRW Automotive was a terrible place to park your money: "Commodity business w/ lots of margin pressure, operating leverage could kill in a double-dip, and most importantly, significant insider selling recently."

In an earlier pitch, JakilaTheHun listed six reasons to steer away from the stock. Here are the first four:

(1) TRW is an automotive supplier and I believe this is an industry that might be overvalued by the market in general right now
(2) TRW has exposure to China, which has seen nearly obscene growth in automobile purchases
(3) I agree with James Chanos' on China --- a massive [real estate] bubble is in place and construction props up GDP --- without this, the Chinese economy suffers and suddenly Chinese consumers can not afford nearly as many cars
(4) TRW's profitability and cash flow numbers are relatively good, but I am not sure that they justify the $31 market price, especially when you consider that TRW has negative tangible equity

What do you think about TRW Automotive, 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!

Fool contributor Brian Pacampara doesn't own a position in any of the companies mentioned. Autoliv is a Motley Fool Hidden Gems recommendation. Motley Fool Options has recommended a covered calls position on Autoliv. The Fool's disclosure policy always gets a perfect score.

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