One of the standouts of today's morning trading session was Grocery Outlet, which logged a 3.7% performance and outperformed the S&P 500 by 3.0%. The Food Chains stock is now trading at $29.0 per share and may still have upside potential because it is still -8.3% under its average target price of $31.62. Analysts have set target prices ranging from $25.0 to $38.0 dollars per share, and have given the stock an average rating of hold.
Grocery Outlet's short interest can give us an idea of what future price movements the market expects from the stock. The short interest is the percentage of shares that are tied up in short positions, which will provide gains to the investor only if the stock price falls. The stock's short interest is 9.7% which seems to indicate a mixed sentiment on GO
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 Grocery Outlet is to look at the percentage of institutions that are invested in the stock. In this case, 102.5% 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.
In conclusion, we see mixed market sentiment regarding Grocery Outlet because of an analyst consensus of some upside potential, a hold rating, an above average percentage of its shares sold short, 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 GO:
The stock has trailing 12 month earnings per share (EPS) of $0.66
Grocery Outlet has a trailing 12 month Price to Earnings (P/E) ratio of 43.9 compared to the S&P 500 average of 15.97
The company has a Price to Book (P/B) ratio of 2.53 in contrast to the S&P 500's average ratio of 2.95
Grocery Outlet is a Consumer Staples company, and the sector average P/E and P/B ratios are 24.36 and 4.29 respectively