WSP Global Inc (WSPOF) shares dropped more than 6% Wednesday after Spruce Point Capital released a short report on the stock.
The firm issued a "Strong Sell" opinion on the TSX-listed company, saying it sees a potential 25% to 50% downside risk.
Spruce Point explained that it has "significant concerns" about the accuracy of WSP's accounting choices and financial reporting, the durability of its growth prospects, and the sustainability of its extreme valuation multiple.
"Based on our findings, we believe WSP is under growing financial strain," said Spruce Point.
The firm notes that WSP trades at an industry premium "on the on the belief that it is a world-class operator and acquiror in the engineering services industry." However, they disagree and believe the company "offers a poor risk/reward of just 8% upside to consensus targets."
"We also believe the company’s true leverage is understated and see 25% - 50% downside risk," concluded Spruce Point.