1-Star Stocks Poised to Plunge: Overstock?

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Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, online retailer Overstock.com (NAS: OSTK) has received the dreaded one-star ranking.

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

Overstockfacts

Headquarters (Founded)Salt Lake City, Utah (1997)
Market Cap$231.4 million
IndustryInternet retail
Trailing-12-Month Revenue$1.09 billion
ManagementChairman/CEO Dr. Patrick Byrne
CFO Stephen Chesnut
Return on Capital (Average, Past 3 Years)1.5%
Cash/Debt$82.7 million / $44 million
CompetitorsAmazon.com (NAS: AMZN)
eBay (NAS: EBAY)
Wal-Mart (NYS: WMT)

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

On CAPS, 69% of the 1,042 members who have rated Overstock believe the stock will underperform the S&P 500 going forward. These bears include chinamantsan and TMFBiggles.

Just last week, chinamantsan touched on a few of Overstock's negatives: "Just can't compete in the online marketplace now. With receiving less traffic to their website and fewer conversions on sales, I think Overstock will be going away soon."

Currently, Overstock even trades at a particularly lofty PEG ratio of 4.8. That represents a premium to rivals Amazon (3.6), eBay (1.3), and Wal-Mart (1.1).

CAPS member TMFBiggles elaborates on the Overstock bear case:

If you can't do well selling supposedly bargain-basement stuff in the current Grouponzi economy, then why expect a turnaround when people eventually decide to loosen the belt buckle?

P/E is high and earnings trending south, double whammy for future drops. Angry, defiant CEOs are never (or very rarely) confidence-builders.

What do you think about Overstock, 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!

Interested in another easy way to track Overstock?Add it to your watchlist.

At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Amazon, eBay, and Wal-Mart, as well as creating a diagonal call position in Wal-Mart. The Fool owns shares of Wal-Mart. 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 Fool's disclosure policy always gets a perfect score.

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