1-Star Stocks Poised to Plunge: LinkedIn?

Brian D. Pacampara, The Motley Fool

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, online professional network operator LinkedIn (NYSE: LNKD) has received the dreaded one-star ranking.

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

LinkedIn facts

Headquarters (Founded)

Mountain View, Calif. (2002)

Market Cap

$7.3 billion

Industry

Internet information providers

Trailing-12-Month Revenue

$436.1 million

Management

Co-founder/Chairman Reid Hoffman

CEO Jeffrey Weiner

Trailing-12-Month Return on Equity

4.0%

Cash/Debt

$387.7 million / $0

Competitors

Facebook

Jigsaw Data Corp.

Monster Worldwide

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

On CAPS, 87% of the 893 members who have rated LinkedIn believe the stock will underperform the S&P 500 going forward.

Just last month, one of those Fools, Seansonfire, touched on the stock's seemingly unsustainable valuation:

LinkedIn will remain a top niche social networking website for professionals going forward. I don't care what Facebook tries to do to compete in the professional space. With that being said, being the top social networking website for professionals is not very profitable nor has LinkedIn done a good job of generating revenues. ... Way overvalued at this point.

There is potential for growth in LinkedIn, but it will take time and I doubt they start generating significant free cash flow anytime soon.

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At the time thisarticle was published Fool contributorBrian Pacamparaowns no position in any of the companies mentioned. The Fool owns shares of LinkedIn. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Fool'sdisclosure policyalways gets a perfect score.

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