Where do you go to make electronics purchases? Fifteen years ago, that question would have been easy for me to answer. I make a trip to my local Best Buy (NYSE: BBY), browse the aisles for a while adding way more than I ever intended to purchase before picking up my targeted item and heading home.

But today the answer is much more complicated than that. Best Buy’s bread and butter electronics are everywhere. Target (NYSE: TGT) and Wal-Mart (NYSE: WMT) provide electronics along with milk and eggs while online retailers like Amazon.com (Nasdaq: AMZN) and eBay (Nasdaq: EBAY) provide selection, great prices, and home delivery.

During a recent rare trip to Best Buy I found myself wondering if it offered anything I couldn’t pick up on my regular Target trips. Outside of a camcorder or a random audio cable there wasn’t much I could think of that I would rather buy at Best Buy. DVDs, computers, TVs, cell phones, and audio equipment can be found almost anywhere and often at better prices.

So if Best Buy doesn’t have a solid competitive advantage, the question becomes whether the stock provides enough value versus the risk the company can’t survive. After all, its biggest competitor, Circuit City, has already bit the dust.

You could look at its trailing P/E ratio of 9.9 or a forward P/E ratio of 8.3 as reasonable values. For the last 10 years revenue has increased and the company has been profitable. And management continues to buy back shares and pay a nice 2.1% dividend. If you didn’t know Best Buy’s competitive position was deteriorating, these numbers might scream, "BUY BUY BUY!"

But I am more concerned about a falling return on assets for the company. Best Buy puts a lot of money into building stores and if the return on those stores is falling while store count is growing the company is throwing good money after bad.






Return on Assets





As you can see above, the trend isn’t headed in the right direction and the trailing return on assets of 8.1% is well below the five-year average of 9.1%.

Despite seemingly attractive earnings multiples and management returning cash to shareholders, I don’t see Best Buy’s stock as a buy right now. With Amazon, Target, Wal-Mart, and others providing more competition than Circuit City ever did, Best Buy may just wander forward as another ho-hum electronics retailer. And I’ll reminisce about how excited I used to be to go to Best Buy back in the good old days.

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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.