Coinstar (Nasdaq: CSTR) has turned the automated kiosk into a nationwide phenomenon. The real question is whether the model can work long term.



Chart Courtesy of StockCharts.com

Coinstar DVD kiosks and coin chaning machines can be seen everywhere, from the inside of big super markets to the outside of convenience stores and fast food restaurants.

Yet, we rarely see any customers doing business at any of these kiosks. And in one case, when we took some change to a coin changing machine, it was out of order for several days, which means that the company lost business from a wide customer base since the machine was in a high traffic supermarket.

What's most interesting is that one significant measure for any company these days, the rate of growth in its cash flow is zero. That suggests that sales may have flattened out. With this stock selling at 40 times earnings, and without paying a dividend, it seems as if its business model may need some tweaking.

Technically, the shares have support near 44, but could fall significantly if that area is taken out.

This is a perfect example of a stock where the tire kicking analyst, such as the one who looks at kiosk traffic and tries out the business, then looks at a chart, and a few metrics, can make some sense out the situation before putting money into a stock that may not pan out.

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