Rocketing to a price of $65.8 during today's morning trading session, shares of Western Alliance Bancorporation are still -30.92% below their average target price of $95.25. Could there be more upside potential for the stock? Analysts are giving WAL an average rating of buy and target prices ranging from $79 to $120 dollars per share.
The market seems to share this rosy outlook, since Western Alliance has a short interest of only 1.9%. This represents the percentage of the share float that is being shorted, and each short position stands for an investor's expectation that the price of the stock will go down in the future.
When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.
Another way to gauge the sentiment on Western Alliance is to look at the percentage of institutions that are invested in the stock. In this case, 85.8% of the shares are held by pension, mutual, and hedge funds, which shows that these institutions probably have strong confidence in the stock.
Institutions have vast resources. If institutions are invested in a particular stock, it shows in most cases that they have performed quality research and concluded that it is a good investment. In some cases, however, increases in institutional ownership could be a sign of a takeover attempt or proxy fight, which can actually injure share prices. Also, institutions are not infallible, and can certainly make miscalculations -- often with spectacular results.
In conclusion, we see exuberant market sentiment regarding Western Alliance because of its an analyst consensus of strong upside potential, a buy rating, a very low short interest, and a significant number of institutional investors. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.
Here's a snapshot of some important facts to keep in mind about WAL:
The stock has trailing 12 month price to earnings (Eps) of $9.25 per share
Western Alliance Bancorporation has a trailing 12 month Price to Earnings (P/E) ratio of 7.1 compared to the S&P 500 average of 15.97
The company has a Price to Book (P/B) ratio of 1.5 in contrast to the S&P 500's average ratio of 2.95
Western Alliance Bancorporation is a Financial Services company, and the sector average P/E and P/B ratios are 13.34 and 1.95 respectively
If you want a more in-depth valuation analysis on this stock and others, subscribe to our free newsletter today.