1-Star Stocks Poised to Plunge: Zale?

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, jewelry retailer Zale (NYSE: ZLC) has received the dreaded one-star ranking.

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


Headquarters (founded)

Irving, Texas (1989)

Market Cap

$205.9 million


Specialty stores

Trailing-12-Month Revenue

$1.9 billion


CEO Theophlius Killion (since 2010)
CFO Thomas Haubenstricker (since 2011)

Return on Capital (average, past 3 years)



$24.6 million / $452.9 million


J.C. Penney
Signet Jewelers

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

On CAPS, 59% of the 258 members who have rated Zale believe the stock will underperform the S&P 500 going forward.

Just this week, one of those bears, All-Star TSIF, tapped the stock's recent run-up as seemingly unsustainable:

May be near the end of a short squeeze after an analyst upgrade "caused" a short spike, followed by a computer trading spike, followed by a bigger short spike, followed by day traders checking in... [E]xpecting a retrace as a 52 week high for [Zale], despite somewhat better earnings the last quarter is not warranted. ... October earnings usually the lowest of the year.

Metrics look deceiving, but could be why [Zale] share price stays higher than warranted. ... [L]ittle if anything gets the bottom line in this highly competitive, economically dependent industry. Short term call, expect a slow bleed back down unless the economy buoys all ships.

If you want market-topping returns, you need to protect your portfolio from any undue risk. Luckily, we've found another retailer we are incredibly excited about -- excited enough to dub it "The Motley Fool's Top Stock for 2012." We have compiled a special free report for investors to uncover this stock today. The report is 100% free, but it won't be here forever, so click here to access it now.

Want to see how well (or not so well) the stocks in this series are performing? Follow the newTrackPoisedToCAPS account.

The article 1-Star Stocks Poised to Plunge: Zale? originally appeared on Fool.com.

Fool contributorBrian Pacamparaowns no position in any of the companies mentioned.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.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.