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2-Star Stocks Poised to Plunge: The Gap?

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, apparel retailer The Gap (NYSE: GPS  ) has received a distressing two-star ranking.

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

Gap facts

Headquarters (founded) San Francisco (1969)
Market Cap $12.2 billion
Industry Apparel retail
Trailing-12-Month Revenue $14.6 billion
Management Chairman/CEO Glenn Murphy (since 2007)
CFO Sabrina Simmons (since 2008)
Return on Equity (average, past 3 years) 25%
Cash/Debt $1.9 billion / $1.7 billion
Dividend Yield 2%
Competitors American Eagle Outfitters
J. Crew Group
TJX Companies

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

On CAPS, 37% of the 835 members who have rated Gap believe the stock will underperform the S&P 500 going forward.

Earlier this week, one of those Fools, All-Star JoeAgresti, succinctly summed up the bear case for our community:

Debt has ballooned, margins have compressed ... and they have done nothing to grow Athleta or Piperlime to the point where I can look past it all. This is not a company going into debt to grow the business long term -- this is a company that is making less and less money every single year. Because of the dividend people will blindly go into [Gap] -- and they will all have to head for the exits when the increased dividend becomes a serious drain on the balance sheet. They should eliminate the dividend all together and focus on the stores -- because that is what matters most.

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. 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.


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Related Tickers

4/17/2014 4:02 PM
GPS $38.58 Down -0.42 -1.08%
Gap CAPS Rating: **

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