Based on the aggregated intelligence of 170,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, Chinese electric motor maker Harbin Electric (Nasdaq: HRBN) has received the dreaded one-star ranking.

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

Harbin facts

Headquarters (Founded)

Harbin, China

Market Cap

$484.7 million


Electrical components and equipment

Trailing-12-Month Revenue

$424.8 million


Chairman/CEO Tianfu Yang

CFO Zedong Xu

Return on Equity (Average, Past 3 Years)



$122.8 million / $111.9 million


Emerson Electric (NYSE: EMR)

General Electric (NYSE: GE)

Nidec (NYSE: NJ)

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

On CAPS, 13% of the 541 members who have rated Harbin believe the stock will underperform the S&P 500 going forward. These bears include tallenuk and All-Star liszewski, who is ranked in the top 0.5% of our community.

A couple of months ago, tallenuk highlighted a few red flags surrounding Harbin:

Chinese RTO. Too good to be true. SAIC filing are completely different to SEC filings. Margins are far too good to be true considering they're a motor company in China and only 'deal' within the Chinese market.

In fact, Harbin's three-year average operating margin of 24.2% even dwarfs that of much larger competitors Emerson Electric (16.4%), General Electric (9.5%), and Nidec (11.6%).

CAPS All-Star liszewski elaborates on the Harbin bear case:

The only thing keeping the price from collapsing is this phantom $24 buyout offer from the CEO Yang. Just a ploy to squeeze shorts in my humble opinion. I doubt it ever materializes. He will have great difficulty securing financing and I suspect he knows more about the company than I do. ... The financials sound the alarm on this one. How are they able to post 35% [gross] margins in a low-tech commodity manufacturing business? This is absurdly above the industry average. ... There is a reason the company constantly reports good numbers while the stock price continues to meander. There is a reason why no insiders have touched this company at much lower prices than the miraculous buyout offer stipulates. Stay far away.

What do you think about Harbin, 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. Motley Fool newsletter services have recommended buying shares of Emerson. Try any of our Foolish newsletter services free for 30 days.

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