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2-Star Stocks Poised to Plunge: Sears Holdings

By Brian D. Pacampara, CFA - Updated Apr 5, 2017 at 8:01PM

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Market-lagging returns could be written in this 2-star.

Based on the aggregated intelligence of 120,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, Sears Holdings (NASDAQ:SHLD) has received a distressing two-star ranking. While one-star stocks have been the worst performers, our data has shown that two-star stocks still lag the market by a significant margin and should be approached with caution; conversely, highly rated stocks have outperformed the S&P.

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

Sears Holdings facts

Headquarters (Founded)

Hoffman Estates, Ill. (1899)

Market Cap

$5.76 Billion

Industry

Department Stores

Trailing-12-Month Revenue

$48.56 Billion

Management

Chairman Edward Lampert

Interim CEO W. Bruce Johnson

Return on Equity (Average, Past Five Years and TTM)

15.8% and 2.8%

Competitors

Wal-Mart (NYSE:WMT)

Target (NYSE:TGT)

CAPS Members Bearish on Sears Holdings Also Bearish on:

Citigroup (NYSE:C),

General Motors (NYSE:GM)

CAPS Members Bullish on Sears Also Bullish on:

Goldman Sachs (NYSE:GS),

Google (NASDAQ:GOOG)

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

On CAPS, 148 of the 390 All-Star members who have rated Sears Holdings -- some 38% -- believe the stock will underperform the S&P 500 going forward. These bears include dexion10 and Tastylunch, both of whom are ranked in the top 7% of our community.

Last week, dexion10 noted the difficulty in the stock's value proposition: "[Too] much debt and declining earnings as far as the eye can see. [Replacement] cost of their leases is higher than market cap but you'd have to find a buyer."

In a pitch just one day earlier, Tastylunch shared that bearishness and updated our community on Sears Holdings' most recent quarter:

Did they or did they not have a big earnings miss yesterday? Sure they are closing underperforming stores and hiring new execs but common their problems go way beyond that.

Seriously [Sears Holdings] has some issues, imagine Wal-Mart-ish appearance stores with no pricing advantage, poor inventory controls, unfocused brand, little marketing and management that isn't retail focused (Buffet wanna-be Eddie Lampert).

That is Sears and it ain't so great. I doubt they will go chapter 11 unless things get really really bad, but they certainly could fall further especially after yesterday's bounce.

What do you think about Sears Holdings, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. More than 120,000 investors are waiting to hear what you have to say. CAPS is 100% free, so get started!

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Sears Holdings and Wal-Mart are Motley Fool Inside Value picks. Google is a choice of  Rule Breakers. The Fool's disclosure policy always gets a perfect score.

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Stocks Mentioned

Sears Holdings Corporation Stock Quote
Sears Holdings Corporation
SHLDQ
Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
WMT
$132.22 (1.85%) $2.40
Target Corporation Stock Quote
Target Corporation
TGT
$172.48 (1.70%) $2.88
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$121.68 (2.39%) $2.84
Citigroup Inc. Stock Quote
Citigroup Inc.
C
$54.38 (0.70%) $0.38
The Goldman Sachs Group, Inc. Stock Quote
The Goldman Sachs Group, Inc.
GS
$353.82 (0.61%) $2.14
General Motors Company Stock Quote
General Motors Company
GM
$39.48 (2.65%) $1.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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