Based on the aggregated intelligence of 125,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, homebuilder Ryland (NYSE:RYL) has received the dreaded one-star ranking. Our data has shown that one-star stocks woefully lag the market average; conversely, five-star stocks outperform the S&P by a significant margin.

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

Ryland facts


Calabasas, Calif. (1967)

Market Cap

$714.35 million


Residential construction

TTM Revenue

$2.29 billion


CEO R. Chad Dreier (since 1993)
COO Larry Nicholson (since 2007)

Return on Equity (average over the last five years and TTM)

9.7% and (51%)


Centex (NYSE:CTX)

CAPS members bearish on RYL also bearish on

Pulte Homes (NYSE:PHM)
Toll Brothers (NYSE:TOL)

CAPS members bullish on RYL also bullish on

Bank of America (NYSE:BAC)
Citigroup (NYSE:C)

Sources: Capital IQ (a division of Standard & Poor's), and Motley Fool CAPS. TTM = trailing 12 months.

Over on CAPS, 221 of the 262 All-Star members who have rated Ryland -- or 84% -- believe the stock will underperform the S&P 500 going forward. These Fools include TheGarcipian and dexion10, both of whom are ranked in the top 5% of our community.

Last month, TheGarcipian let the bearish stats speak for themselves: "Losses are piling up, and little new building is being done. Profit margins are at -21.3%, operating margin is barely above water at 3% as is Return on Assets at 1.8%, while Return on Equity is a blistering -47.2% in the most recent quarter."

In a pitch from last week, dexion10 shares that bearishness, listing 10 great reasons why Fools should run from Ryland. Below are the first five, but be sure to check out Nos. 6 through 10, too:

  1. Ryland has used aggressive accounting to value its book of raw land and will have further write downs as time goes on.
  2. RYL is trading above its "inflated" book value.
  3. Ryland also has significant leverage $700M+.... this limits there ability to buy distressed land and lower their cost basis.
  4. RYL will not be a profitable as new builders / legacy builders buying distressed land.
  5. National builders are all crowding the same second tier markets to replace the decline in demand in formerly "hot markets."

What do you think about Ryland, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. CAPS is 100% free, so simply click here to get started.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.