Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, video game retailer GameStop (NYSE: GME ) has received a distressing two-star ranking.
With that in mind, let's take a closer look at GameStop's business and see what CAPS investors are saying about the stock right now.
GameStop facts
| Headquarters (founded) | Grapevine, Texas (1994) |
| Market Cap | $3.21 billion |
| Industry | Electronics stores |
| Trailing-12-Month Revenue | $9.66 billion |
| Management | CEO J. Paul Raines (since 2010) CFO Robert Lloyd (since 2010) |
| Return on Equity (average, past 3 years) | 15% |
| Cash/Debt | $442.6 million / $124.7 million |
| Competitors | Amazon.com (Nasdaq: AMZN ) Target (NYSE: TGT ) Wal-Mart (NYSE: WMT ) |
Sources: S&P Capital IQ and Motley Fool CAPS.
On CAPS, 8% of the 3,182 members who have rated GameStop believe the stock will underperform the S&P 500 going forward. These bears include All-Star starz188, who is ranked in the top 10% of our community, and MajorBob04.
About a month ago, starz188 touched on the tailwinds working against GameStop: "Digital downloads and/or purchases from online vendors like Amazon make this the next version of [Borders Group]."
Over the next five years, in fact, GameStop is expected to grow its bottom line at a rate of just 8% annually. That's slower than main online threat Amazon (22%), as well as big-box retailers Target (11%) and Wal-Mart (10%).
CAPS member MajorBob04 elaborates on the bear case:
GameStop is doing all the right things to keep the stock price up, but the longer term projections show that sales are slowing, earnings are slowing, and ultimately the business model is deteriorating. Until they can get into a business with a growth, or at least profitable, forecast, the long-term projection is that ultimately the stock will suffer.
What do you think about GameStop, 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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