Wall Street Thinks That Medical Properties Trust Stock Could Rise 25%. Can It Happen?
According to the average estimate of Wall Street analysts, Medical Properties Trust (NYSE: MPW) stock is going to rise by 25% within a year. Given that over the past 12 months it actually fell by 39%, massively underperforming the S 500 index's rise of 16%, that price target deserves some skepticism, especially from investors who are considering whether to purchase the stock.
Let's unpack this issue by looking at what the company would need to do for the analysts to be right, and then think about what its chances actually are of following through on those things.
For Medical Properties Trust stock to rise by as much as analysts are calling for within a year's time, three things need to happen. First, it can't cut its dividend despite having a payout ratio well in excess of 100% of its net income, as a cut would frustrate investors and likely cause its shares to fall. Second, it needs to somehow cover both its operating expenses and pay its maturing debts, as otherwise it would be insolvent. Third, it needs to do those two things without sabotaging its future prospects for growth. And there are a handful of intertwined constraints when it comes to tackling any of the above.
Source Fool.com
