One of the standouts of today's morning trading session has been Caterpillar, which logged a -1.0% drop and underperformed the S&P 500 by -1.0%. The Heavy Machinery stock is now trading at $215.18 per share and is -13.09% below its average target price of $247.58. Analysts have set target prices ranging from $175.0 to 306.0 dollars per share, and have given the stock an average rating of hold.
It seems the market sentiment regarding Caterpillar is mostly optimistic, since it has a short interest of only 1.4%. This is the percentage of the share float that is being shorted by investors who are hoping the stock's price will decrease 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 Caterpillar is to look at the percentage of institutions that are invested in the stock. In this case, 72.1% of the shares are held by pension, mutual, and hedge funds, which shows that these institutions probably have strong confidence in the stock.
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.
Overall, there is mixed market sentiment towards Caterpillar because of an analyst consensus of some upside potential, a hold rating, a very low short interest, and an average 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 CAT:
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It has trailing 12 month earnings per share (EPS) of $12.64 per share
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Caterpillar has a trailing 12 month Price to Earnings (P/E) ratio of 17.0 while the S&P 500 average is 15.97
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The company has a Price to Book (P/B) ratio of 7.0 in contrast to the S&P 500's average ratio of 2.95
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Caterpillar is a Industrials company, and the sector average P/E and P/B ratios are 20.49 and 3.78 respectively
