Based on the aggregated intelligence of 170,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, Redbox parent Coinstar (Nasdaq: CSTR) has received a distressing two-star ranking.

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

Coinstar facts

Headquarters (Founded)

Bellevue, Wash. (1991)

Market Cap

$1.96 billion


Business equipment

Trailing-12-Month Revenue

$1.46 billion


CEO Paul Davis (since April 2009)

CFO Scott Di Valerio (since March 2010)

Return on Capital (Average Past 3 Years)



$36.5 million / $354.5 million

Price-to-Earnings (CSTR and S&P 500)

48.5 and 15.1


Netflix (Nasdaq: NFLX)


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

On CAPS, 17% of the 453 members who have rated Coinstar believe the stock will underperform the S&P 500 going forward. These bears include AlphaCenturion and icu81mi.

This past summer, AlphaCenturion touched on Coinstar's seemingly unsustainable valuation: "I hate to redthumb this because I love Redbox, but Coinstar runs a horribly high-debt, low-margin business and I don't believe the premium is justified."

Despite Coinstar's stellar growth of late, many Fools think the company's fundamentals still leave much to be desired. Coinstar's three-year average operating margin (7.5%) is higher than fellow DVD kiosk operator NCR's (3.3%), but it's still much lower than that of the increasingly digital-focused Netflix (11.5%). While Redbox is rumored to be in partnership talks with the likes of Amazon (Nasdaq: AMZN), Wal-Mart (NYSE: WMT), and Sonic Solutions (Nasdaq: SNIC) in its plans to offer streaming video, CAPS member icu81mi remains skeptical about the company's prospects in the space:

There is absolutely not enough growth in that model to sustain to sustain this kind of multiple, not to mention all the debt they're taking on to fuel their expansion. Coinstar knows this too so they throw out "teasers" every once in a while about a possible streaming service to boost sentiment. Think about it. Even if streaming did somehow fit into Coinstar's model which it doesn't, what are the chances they can take any significant market share away from Netflix who utterly dominates that niche?

What do you think about Coinstar, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Amazon and Netflix are Motley Fool Stock Advisor selections. Wal-Mart is also Inside Value pick, and the Fool owns shares of it. 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 Motley Fool has a disclosure policy.