Why Babcock & Wilcox Stock Just Dropped Another 23%

MarketsMotley Fool

What happened

Babcock & Wilcox (NYSE: BW) investors just cannot catch a break. Shares of this industrial equipment maker got crushed when it reported earnings earlier this month -- a reaction that at least had the justification of being caused by a catalyst. With shares down a further 23% as of noon EDT today, though, it seems investors are willing to sell Babcock & Wilcox stock for no reason at all.

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So what

So what did Babcock & Wilcox do today to justify its latest sell-off? For the life of me, I cannot tell you. The company hasn't issued any press releases to explain the negative reaction, nor filed anything negative with the SEC. Neither StreetInsider.com nor TheFly.com -- my two favorite go-to sites for ratings news -- contain even a hint of negative Wall Street sentiment.

It almost seems like investors' default option for Babcock & Wilcox stock these days is to sell -- a fact that the greater than 23% short interest in the stock seems to confirm.

Now what

Which is not to say that that's the wrong way to treat Babcock & Wilcox stock. With no earnings to its credit (the company has actually lost money in three of the past four years), negative free cash flow (likewise -- a three-time loser in four years), and more debt than cash on its balance sheet, Babcock & Wilcox certainly doesn't look like the most attractive business today.

On the other hand, analysts who follow the stock think that this year could be the year Babcock finally turns the corner and begins generating at least a trickle of free cash flow. If and when that happens, sentiment on Babcock & Wilcox stock could turn up just as sharply as it's recently turned down.

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Rich Smith 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.