2-Star Stocks Poised to Plunge: Diamond Foods?

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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, snack products company Diamond Foods (NAS: DMND) has received a distressing two-star ranking.

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

Diamondfacts

Headquarters (Founded)San Francisco (1912)
Market Cap$518.6 million
IndustryPackaged foods and meats
Trailing-12-Month Revenue$965.9 million
ManagementActing CEO Richard Wolford
Acting CFO Michael Murphy
Return on Equity (Average, Past 3 Years)12.1%
Cash/Debt$3.1 million / $531.7 million
Dividend Yield0.8%
CompetitorsConAgra Foods
Frito-Lay
Kraft Foods

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 25% of the 265 members who have rated Diamond Foods believe the stock will underperform the S&P 500 going forward.

Just last week, one of those bears, fellow Fool Seth Jayson (TMFBent), wrote that Diamond Foods has plenty of room to fall:

I don't think the pain is over here. This is a company that was obsessed with its image (they love to write emails to whine about their treatment in articles, for instance...) Why? Because they were running a roll-up game, buying "growth" with inflated stock. ...

Now it looks like we had outright fraud, with the CEO and CFO getting canned for moving costs around in what looks like an attempt to smooth the numbers. Pringles is a crummy asset anyway, but they won't even be able to pretend they'll be harvesting "synergies" by folding it in, since I would bet that [Procter & Gamble] won't bless the buy ...

What's a broken growth story worth? What's a broken growth story that may have been entirely predicated on fraud worth? Surprisingly, the answer may be "more than the current market price," but I am willing to bet that most investors won't see it that way for quite a while, and I expect this thing to continue to crater.

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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 Procter & Gamble. 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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