As a value investor, I should be attracted to a strong operator with its stock price near a 52-week low. When combined with struggling direct competitors, that sounds like the perfect storm for a bargain.

So I'm sorry, folks. Despite the seemingly optimal circumstances, I don't think electronics retailer Best Buy (NYSE:BBY) is such a great deal today. And once you've finished reading, you'll understand why.

Do you think I'm worried about the short-term outlook? Nope, that's not it. I'm glad the retailer ran into some snags, because problems can cultivate uncertainty -- which in turn can bring stock prices down to attractive levels.

Do you think I'm worried about the consumer being tapped out, ready to cut back on discretionary spending on home electronics? That's not it either. Sure, it's something to consider, and I'd be a fool (small f) not to recognize the problem. But the American consumer has proven amazingly resilient despite carrying historically high credit card balances.

Three things do bother me, though, and they are longer-term in nature.

  1. The competitive landscape is changing.
  2. The company made a late start in China.
  3. The cash flows required to justify the current stock price seem high.

New, big threats
I'm not focused on the competition from Circuit City (NYSE:CC). That pressure is constant and not going away. Tweeter recently declared bankruptcy, so there's less pressure from the high end right now. My worries focus around the value propositions that Wal-Mart (NYSE:WMT) and Costco (NASDAQ:COST) can offer customers.

While Costco may not have the breadth of selection that Best Buy can offer, it does have a powerful ace up its sleeve: Its members know they will get a good deal. Costco can sell popular items, like Sony (NYSE:SNE) high-definition televisions or Garmin (NASDAQ:GRMN) GPS systems, at great prices. So that can put pressure on prices and margins at Best Buy.

I don't go into Wal-Mart very often. But every time I've gone in lately, it seems as though the consumer electronics department gets bigger and bigger and has more and more customers in my way, preventing me from playing Xbox games while my wife shops. Its buying power and commitment to low prices could bring additional price and margin pressure to Best Buy.

These two retailers seem to be stepping up their efforts in consumer electronics, and it could be difficult for Best Buy to continue to make those margin improvements going forward, reducing returns on invested capital.

Too little, too late?
There's no doubt that Best Buy rules the American roost. Now it's looking to bring the big blue box to China, opening eight to 10 stores this month. It's a good plan, but I think it is severely behind the eight ball here. The company just doesn't have much experience running stores in other countries. Gome, the largest consumer electronics retailer in China, is not making things easy for Best Buy -- and it has a big head start.

Stagnant cash flows?
So with competition heating up both domestically and internationally, expansion plans may not necessarily be the saving grace that Best Buy needs to produce those future cash flows that will cause its stock price to grow. If the past two years of declining free cash flow are any indication of the future, then Best Buy's stock price, which is near its 52-week low, could face even more downward pressure.

Best Buy is a great company that has produced incredible growth and performance over the last 15 years. But further growth is tough for a larger company, especially when other power companies can compete effectively. It puts future cash flows in doubt and causes me to be a bear.

You're not quite done yet! If you missed the Bull's argument, it's here. If you've already read everything, cast your vote for the winner here.

Best Buy is a Motley Fool Stock Advisor recommendation. The newsletter is handily outperforming the market, and all you need to do get started with a subscription is join us today with a free 30-day trial. Costco and Garmin are also Stock Advisor selections.

Wal-Mart is an Inside Value recommendation.

Retail editor David Meier is ranked No. 6,238 out of 31,145 in CAPS and does not own shares in any of the companies mentioned. You can view his TMF profile here. The Fool takes its disclosure policy very seriously.