The Motley Fool Previous Page

Is STEC Stuck in Reverse?

Rich Duprey
September 16, 2012

Wall Street can't generate enthusiasm for solid-state drive maker STEC (Nasdaq: STEC  ) , so why do our Motley Fool CAPS members disagree? More than 730 members of the investment community have weighed in on its prospects, and 92% of them see it outperforming the broad market averages, bestowing on it high honors with a four-star rating. In contrast, 44% of the analysts rating it believe it will stumble.

So who has it right? The professional class of analysts sitting in their paneled offices smoking stogies, or a motley community of investors pooling their best thoughts for others to share? We think we know who'll come out ahead. How about you?

STEC Snapshot

Market Cap $332 million
Revenues, TTM $222 million
1-Year Stock Return (25.8%)
Return on Investment (18.9%)
Estimated 5-Year EPS Growth 25.3%
Dividend and Yield NA/NA
Recent Price $7.13
CAPS Rating (out of 5) ****


Of course, as much as we love our CAPS community, don't buy a company just because it's garnered top ratings. And don't sell it just because Wall Street says to, either. Investing requires closer diligence on your part, so use a stock's CAPS rating as a launching pad for your own research.

Take it for a spin
The disk-drive maker is in the midst of a transition that may take some time to gain traction, but the 50% drop in revenues STEC experienced last quarter must have investors wondering how long it can survive. The rate of decline is accelerating each quarter, and losses are growing wider, too. Still, the switch from a manufacturer marketing its drives through OEMs to one selling directly to enterprise customers and end-users suggests it's having a tough time in the marketplace against rivals OCZ Technology (NYSE: OCZ  ) , Western Digital, and SanDisk (Nasdaq: SNDK  ) .

Almost 90% of its revenues come from its top 10 customers, while the top three -- EMC (NYSE: EMC  ) , IBM, and Hitachi -- account for 70%. So STEC's rati