On Wall Street, one thing is for certain: all forms of investments carry a certain degree of risk. Since risk and reward are positively correlated, equities, which usually generate higher returns than all other asset classes in the long run, tend to carry higher risk.
Thus, it’s prudent to identify risks before investing, to minimize losses and maximize returns.
Consider the case of American Airlines (AAL). Before the COVID-19 virus turned into a pandemic and disrupted businesses across the world, the airline company’s risk disclosure included the outbreak of diseases as a factor that could hurt travel demand and affect travel behavior. In turn, that could take a toll on its stock price.
Investors who closely scrutinized these risk factors are probably lucky, as they must have avoided significant losses resulting from the COVID-19 pandemic.
However, that’s easier said than done, as investors are often not well-informed about the risks associated with a particular stock or an industry. Though the publicly listed companies disclose risk factors in their quarterly and annual SEC filing, investors could find it tough to derive value from it, as the list is usually lengthy and tedious to read.
Coming to the rescue is the big financial data aggregator, TipRanks, which launched an invaluable Risk Factors tool to make informed investing easier. This comprehensive tool helps investors understand all the possible risks unique to a company that could impact its stock price. Further, investors can use the tool to compare the company’s risk factors with sector benchmarks, helping them to consider the worst-case scenario ahead of investing.
TipRanks’ Risk Factor tool is dynamic and incorporates all changes, or new risk additions.
According to TipRanks’ unique Risk Analysis tool, the following stocks have recently added new risk factors.
Walgreens Boots Alliance
Per the new TipRanks’ Risk Factors tool, Walgreens Boots Alliance’s (WBA) main risk category is Finance & Corporate, accounting for 31% of its total risks. However, it still compares favorably to the sector average of 39.4%.
Since August 2021, Walgreens has added three new risks factors. One is under its Finance & Corporate category, where Walgreens noted that the success of its business depends on the right execution and implementation of its strategic initiatives. The failure to do so could elevate costs or materially impact its business.
Additionally, under its Macro & Political category, Walgreens acknowledged that climate change could impact the availability of commodities and energy and could have a widespread and unpredictable impact on its business.
Also, highlighting the supply-chain disruption under the Production category, Walgreens stated that this could lead to increased costs and reputational damage, and adversely affect its business.
On a brighter note, all of Walgreens Boots Alliance’s risk categories compare favorably to the sector benchmarks for those categories.
Meanwhile, On TipRanks, Walgreens Boots Alliance is a Hold, based on 1 Buy and 4 Holds. The average Walgreens Boots Alliance price target of $55 implies approximately 14.6% upside potential to current levels.
Accenture
Like Walgreens, Accenture’s (ACN) main risk category is Finance & Corporate, which accounts for 32% of its total risks. However, it remains well below the sector average of 50%.
Since August 2021, Accenture added two new risks factors. Under its Legal & Regulatory category, Accenture noted that its global operations expose it to various legal and regulatory requirements. Violation of any regulations could lead to hefty fines, hurt its reputation, and negatively affect its business.
Furthermore, under its Macro & Political category, Accenture acknowledged that the pandemic has adversely impacted its business. Moreover, the uncertainty related to coronavirus could hurt its operations in the future and negatively impact its financial results.
Nevertheless, Accenture sports an analyst rating consensus of Strong Buy, based on 12 Buys and 2 Holds. The average Accenture price target of $380.15 implies approximately 8.7% upside potential to current levels.
Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.
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