1-Star Stocks Poised to Plunge: ZAGG?
Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, handheld device accessory specialist ZAGG (NAS: ZAGG) has received the dreaded one-star ranking.
With that in mind, let's take a closer look at ZAGG's business and see what CAPS investors are saying about the stock right now.
|Headquarters (founded)||Salt Lake City|
|Market Cap||$383.6 million|
|Trailing-12-Month Revenue||$118.1 million|
Chairman/CEO Robert Pedersen II
CFO Brandon O'Brien
|Return on Equity (average, past 3 years)||37.2%|
|Cash/Debt||$13.5 million / $66 million|
|Competitors||Apple (NAS: AAPL)|
Sources: S&P Capital IQ and Motley Fool CAPS.
On CAPS, 38% of the 336 members who have rated ZAGG believe the stock will underperform the S&P 500 going forward. These bears include All-Stars PaulNy and TSIF, both of whom are ranked in the top 5% of our community.
This past summer, PaulNy touched on ZAGG's seemingly unsustainable valuation:
As a longtime user of the Invisible Shield, I was disappointed with my last one for an iPhone (lasted 3 months). Went with a rival product which seems much better. Not sure that Zagg's popularity will grow.
In fact, ZAGG currently sports a rather lofty P/E of 25. That represents a clear premium to Apple (14.3), whose SmartCover now competes directly with ZAGG, as well as Hewlett-Packard (NYS: HPQ) (6.0) and Research In Motion (NAS: RIMM) (3.5).
CAPS All-Star TSIF elaborates on the bear case:
I'm back again on the theory that ZAGG well overshot its mark on this rally, mostly due to short covering. I've pitched extensively about how over valued ZAGG is and my concern that their return policy and accounting model is suspect at best and will catch up with them. Also, you can't inventory a thousand [SKUs] that go dead as fast as you generate new ones. Those fond of ZAGG have some of the strongest conviction bias I have ever seen. Good luck to them. This economy is still in flux and ZAGG will show it's true value in 6-9 months.
What do you think about ZAGG, 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!
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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 Apple. Motley Fool newsletter services have recommended buying shares of and creating a bull call spread position in Apple. 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.