Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, clinical-stage drug company Pharmasset (Nasdaq: VRUS) has received the dreaded one-star ranking.

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

Pharmasset facts

Headquarters (Founded) Princeton, N.J. (1998)
Market Cap $4.9 billion
Industry Biotechnology
Trailing-12-Month Revenue $990,000
Management

President/CEO P. Schaefer Price (since 2004)

CFO Kurt Leutzinger (since 2005)
Return on Capital (Average, Past 3 Years) (44.2%)
Cash/Debt $188.2 million / $4.4 million
Competitors

Merck (NYSE: MRK)

Vertex Pharmaceuticals (Nasdaq: VRTX)

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

On CAPS, 56% of the 189 members who have rated Pharmasset believe the stock will underperform the S&P 500 going forward. These bears include All-Stars BuffettJunior1 and fellow Fool Sean Williams (TMFUltraLong), both of whom are ranked in the top 15% of our community.

Just last month, BuffettJunior1 touched on Pharmasset's seemingly unsustainable valuation:

This is truly one of the most overvalued stocks that I have ever seen. The company didn't even earn 1 million in revenue last year, and yet it has a market cap of 4.6 billion. The company has been losing an increasing amount of money every year since it has gone public.

In fact, Pharmasset currently sports an almost unbelievable price-to-sales multiple of over 4,700. That's obviously a massive premium compared to other pharmaceutical stocks like Merck (2.1), Vertex (34.1), and Pfizer (NYSE: PFE) (2.1).

Fellow Fool Sean Williams elaborates on the bear case:

It would literally take an act of God to justify Pharmasset's valuation at these levels. The company, if it can get any of its trials approved and onto market, is at minimum 2 years away from any revenue stream. Recent data released was positive, but the focus group literally could not have been any smaller. ... This is one of the goofiest valuations I've ever witnessed.

What do you think about Pharmasset, 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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