Here's why Forterra's stock is plunging today

MarketsMotley Fool

What happened

Shares of Forterra Inc. (NASDAQ: FRTA) plummeted on Wednesday and were down 20% at 10:45 a.m. EST after an analyst at Goldman Sachs downgraded the stock.

Continue Reading Below

So what

The bank cut its rating on the pipe manufacturer from neutral to sell, and set its price target at $5 per share, which is still $2 above where the stock currently trades even after today's downdraft. The analyst argues that the company has limited growth prospects and faces rising input cost pressures, which would limit its ability to generate free cash flow.

Forterra's share price has been excruciatingly volatile over the past year. Its downward spiral started last May after the company's disappointing first-quarter results, which led several analysts to downgrade the stock the next day. The crash continued in August after the company reported weak second-quarter results. The stock bounced back in November after Forterra posted better results in the third quarter. That said, the company is clearly struggling with weaker-than-expected demand for its water and drainage pipes.

Now what

Forterra endured a brutally tough 2017, with revenue expected to decline due to weaker demand, made worse by the impact of several hurricanes and the sale of one of its business units. While that deal enabled the company to shore up its balance sheet as it works through its other issues, Forterra has a long way to go before it wins back both analysts and investors. Because the company hasn't started turning things around just yet, today's sell-off doesn't look like a buying opportunity.

10 stocks we like better than Forterra, Inc. Common StockWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Forterra, Inc. Common Stock wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of January 2, 2018

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Continue Reading Below