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Lender Processing (LPS)

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Lender Processing Services' (LPS) first-quarter 2011 results were a mixed bag. We are concerned about the high debt on its balance sheet as well as challenging origination and default market. There is also a possibility of further foreclosure delays.

Moreover, the company is anticipating near-term challenges due to significant changes in the origination volumes. Hence, we downgrade our recommendation from Neutral to Underperform on the shares.

Our six-month target price of $24.00 equates to about 6.8x our estimate for 2011. The target price implies an expected total negative return of 8.44% over that period.

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