1-Star Stocks Poised to Plunge: Star Scientific?
Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, smokeless tobacco products specialist Star Scientific (NAS: CIGX) has received the dreaded one-star ranking.
With that in mind, let's take a closer look at Star Scientific's business and see what CAPS investors are saying about the stock right now.
|Headquarters (Founded)||Glen Allen, Va. (2000)|
|Market Cap||$426.8 million|
|Management||CEO Jonnie Williams Sr. (since 1999)|
CFO Park Dodd (since 2007)
|Return on Capital (Average, Past 3 Years)||(106.3%)|
|Cash/Debt||$10.4 million / $5.7 million|
Sources: S&P Capital IQ and Motley Fool CAPS.
On CAPS, 48% of the 282 members who have rated Star Scientific believe the stock will underperform the S&P 500 going forward.
As always, the real story governing the value of Star is their ongoing nuisance lawsuit against RJ Reynolds. In August 2011 the share price dropped after the US Court of Appeals refused to order a new trial despite upholding the validity of Star's patents. ... Now the share price has ripped north of 3 again on word that the federal court has referred the patent infringement case to a magistrate judge for possible settlement.
I'm not a legal expert, so I'm out on a limb here. What is most notable here is that RJ Reynolds hasn't offered any kind of settlement, and this seems more like a move by the federal court to clear an irritating and trivial case from their docket. ... This won't be a multibillion dollar payout for a lung cancer class action suit. With a market cap of 440M, minimal cash, laughable product sales, and dismal long-term prospects outside of the lawsuit, Star's share price is pricing in an unlikely outcome.
What do you think about Star Scientific, 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 Altria. 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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