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On Tuesday, Wood Group (WG:LN) (OTC: WDGJF), a $394 million market cap engineering services company, experienced a change in stock rating as Jefferies analyst Mark Wilson downgraded the company from Buy to Hold. Accompanying this downgrade, Wilson also significantly reduced the price target from GBP1.90 to GBP0.50. The adjustment reflects concerns over new levels of uncertainty within the company. According to InvestingPro data, the stock currently trades at a modest 0.15 times book value, suggesting potential undervaluation despite the challenges.
The analyst acknowledged that Wood Group has seen some financial benefits in recent years, particularly from the disposal of non-core assets which have generated a cash inflow of $2.4 billion. Despite this, Wilson pointed out that the positive aspects are currently overshadowed by the uncertainty following the announcement of an independent review of the company’s operations. The market’s concerns are reflected in the stock’s performance, with InvestingPro data showing a 71% decline over the past year.
Wilson’s statement highlighted the impact of the acquisition of AMFW in 2017, which has since been followed by a period of underperformance for Wood Group. The analyst suggested that the value arguments for the company’s performance could be considered more favorably if they were presented by a third party.
The revised price target represents a 74% decrease from the previous target, indicating a significant shift in expectations for the stock’s performance. This substantial reduction underscores the analyst’s concerns about the internal challenges facing Wood Group.
Investors and market watchers will be keeping a close eye on Wood Group’s stock following this downgrade and price target revision. The company’s future steps in addressing the uncertainties and improving performance will be critical in determining the direction of its stock value. While currently unprofitable, InvestingPro analysis shows analysts expect the company to return to profitability this year, with a forecasted EPS of $0.07. InvestingPro subscribers can access 12 additional key insights about Wood Group’s valuation and financial health.
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