Why Wausau Paper Got Cut Down

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While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of tissue products company Wausau Paper plunged 6% this morning after it posted disappointing third-quarter results and received a downgrade -- from buy to hold -- from Deutsche Bank.

So what: Along with the downgrade, analyst Mark Wilde planted a price target of $14 on the stock, representing about 3% worth of upside to yesterday's close. While momentum traders might be attracted to Wausau's steady climb in 2013, Wilde thinks that the appreciation prospects are limited given the company's downbeat guidance for the rest of the year and 2014.

Now what: According to Deutsche Bank, Wausau's risk/reward trade-off is rather unappealing at this point. "[T]he real 'news' is that FY13Q4 & FY14 EBITDA targets fell short of our existing est's & WPP's prior guidance," noted Deutsche. "Finally, commentary notes 'modified sequencing' of its new premium products into the mkt and Q3 #'s suggest that 7.4% vol growth was driven as much by lower margin 'support' products as the firm's new premium offerings." When you couple those troublesome trends with the stock's 30-plus forward P/E, it's tough to argue with Deutsche's downgrade. 

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The article Why Wausau Paper Got Cut Down originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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