Based on the aggregated intelligence of 170,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, video game retailer GameStop (NYSE: GME) has received a distressing two-star ranking.

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

GameStop facts

Headquarters (Founded)

Grapevine, Texas (1994)

Market Cap

$3.08 billion


Electronics stores

Trailing-12-Month Revenue

$9.3 billion


CEO J. Paul Raines (since 2010)

CFO Robert Lloyd (since 2010)

Return on Equity (Average Past 3 Years)



$181 million / $249 million

Competitors (Nasdaq: AMZN)

Best Buy (NYSE: BBY)

Wal-Mart (NYSE: WMT)

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

On CAPS, 7% of the 3,265 members who have rated GameStop believe the stock will underperform the S&P 500 going forward. These bears include HollywoodDan and Motley Fool co-founder David Gardner (TMFSpiffyPop), both of whom are ranked in the top 10% of our community.

Just last week, HollywoodDan touched on the digital headwinds working against GameStop: "How on earth can they survive people downloading games instantly? They can't. At 3B valuation they have a nice long cliff to drop off. If I shorted stocks in real life, this and [Barnes & Noble] would top my list."

In fact, at 16.7%, GameStop's three-year average return on equity is lower than that of gorilla retail rivals Amazon (25%), Best Buy (23.4%), Wal-Mart (21.3%), and Target (NYSE: TGT) (17.2%).

David Gardner elaborates on the bear case:

With Activision (Nasdaq: ATVI) ending the Guitar Hero franchise, and with the music game genre in steep decline, these kinds of changes hit GameStop harder, as it benefited from add-on hardware purchases. Further, Activision -- the industry leader -- grew its digital revenues by 40% last year. I now have stronger questions about GameStop's viability as a bricks-and-mortar business. So I rate Underperform again.

What do you think about GameStop, 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 Options has recommended writing covered calls on GameStop and a synthetic long position on Activision. Amazon, Best Buy, and Activision are selections of Motley Fool Stock Advisor. Best Buy is also a Motley Fool Inside Value pick. Wal-Mart is a Motley Fool Inside Value and Motley Fool Global Gains recommendation. The Fool owns shares of GameStop, Best Buy, Wal-Mart, and Activision. Try any of our Foolish newsletter services free for 30 days.

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