The DuluxGroup Limited (ASX: DLX) share price has been the worst performer on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) today with a 6% drop to $6.40.
With no news out of the paint and building products company, today's decline is likely to be attributable to a research note out of leading investment bank UBS.
According to the note UBS has downgraded DuluxGroup's shares to a sell rating with a $6.10 price target.
Although the investment bank appears to be pleased with the company's paint business, it is less impressed with its non-paint businesses.
Its analysts believe a turnaround is some way off and expect them to continue to act as a drag on the company's performance.
A further concern is that a weakening housing market could be a sign that its paint sales have now peaked.
Should you buy today's dip?
I would have to agree with UBS on this one. Prior to today DuluxGroup's shares had rallied 9% this year and were starting to look a touch expensive at 20x trailing earnings.
I feel this puts them at risk of a sharp decline if paint sales have peaked. Especially if its Consumer and Construction Products, Garage Doors and Openers, and Other Businesses segments don't turn around their faltering performances.
After all, the three segments combined accounted for 38% of company sales in FY 2016.
Rather than invest in DuluxGroup, I would suggest investors look at fellow materials sector peers such as Orora Ltd (ASX: ORA) and South32 Ltd (ASX: S32).
