1-Star Stocks Poised to Plunge: Rediff.com?

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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, Indian web portal Rediff.com (NAS: REDF) has received the dreaded one-star ranking.

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

Rediff facts

Headquarters (Founded)Mumbai, India (1996)
Market Cap$250.5 million
IndustryInternet software and services
Trailing-12-Month Revenue$22 million
Management

Founder/Chairman/CEO Ajit Balakrishnan

CFO Jayesh Sanghrajka

Operating Margin (Average, Past 3 Years)(48.4%)
Competitors

Google (NAS: GOOG)

Sify Technologies (NAS: SIFY)

Yahoo! (NAS: YHOO)

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

On CAPS, 24.5% of the 208 members who have rated Rediff believe the stock will underperform the S&P 500 going forward. These bears include HollowMountain and All-Star TSIF, who is ranked among the top 50 members in our community.

Earlier this year, HollowMountain wrote that it was just too soon to buy into Rediff:

I understand the Idea for liking his stock, but at this time, only a small slice of the population of India is connected to the Internet, and Rediff is not even the chosen portal. The company itself is shrinking every year, and they continue to bleed money. Maybe someday, but not today.

Currently, Rediff even sports a particularly lofty price-to-sales ratio of 11.7. That represents a clear premium to listed rivals like Google (5.3), Sify (5.4), and Yahoo! (3.3).

CAPS All-Star TSIF elaborates on the Rediff bear case:

Rediff.com is an excellent example of how the majority of traders and investors have no ability to do any basic research and tend to just follow the crowd. ...

You would think that in a year of spiking and dropping that someone would catch on that there is no revenue and no growth in this India wannabe. Yes, the potential in India is huge, so that's where the dreamers plant their flags before leaping off the cliff. ...

India may have some growth opportunities, but they will develop slowly and Rediff.com is not showing that it's benefiting.

What do you think about Rediff, 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 trackRediff?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. The Motley Fool owns shares of Google and Yahoo!. Motley Fool newsletter services have recommended buying shares of Google and Yahoo!. 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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