With a sudden -3.3% drop to $77.52, Cardinal Health has Wall Street wondering if its shares will keep moving past its target price of $77.23. With an average rating of hold, and analysts assigning target prices from 56 to 90 dollars per share, investors will be betting heavily on the Medical Distribution stock's next move.
To understand the market's outlook on the stock, we can look at Cardinal Health's short interest: the proportion of the share float that is tied to short positions. Behind each short position is an investor who believes that the stock will decline in the future. Here, the stock's short interest is 7.6% which means the outlook is split.
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.
One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of Cardinal Health, institutional investors own 92.3% of the shares, which indicates they have a very high stake in the company. What does this really tell us?
Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in CAH, it probably means they believe it is a solid investment choice.
But it could also mean they are buying up shares in an effort to acquire the company or to get seats on the board of directors. Also bear in mind that institutions are fallible (just maybe not quite as fallible as the average retail investor), so they may simply be wrong when they think they've found a good stock.
Overall, there is mixed market sentiment towards Cardinal Health because of its an analyst consensus of little upside potential, a hold rating,, an average amount of shares sold short, and a significant number of institutional investors. Investors should not base their decisions on market sentiment only, they should also be aware of a stock's fundamentals before committing.
At a glance, here are some essential statistics you may want to know about CAH:
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It has trailing 12 month earnings per share (Eps) of $-3.38 per share
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Cardinal Health has a trailing 12 month Price to Earnings (P/E) ratio of -23.0 while the S&P 500 average is 15.97
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Cardinal Health is a Healthcare company, and the sector average P/E and P/B ratios are 13.21 and 4.07 respectively
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