One of the standouts of today's morning trading session was Muscle Maker, which logged a 13.6% performance and outperformed the S&P 500 by 14.0%. The Restaurant Chain stock is now trading at $1.46 per share and may still have upside potential because it is still -39.17% under its average target price of $2.4. Analysts have set target prices ranging from $2.4 to $2.4 dollars per share, and have given the stock an average rating of buy.
The market seems to share this rosy outlook, since Muscle Maker has a short interest of only 3.0%. 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.
Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.
One way to tell how the market is perceiving a stock is to look to its rate of institutional ownership. With their vast resources, hedge funds, pension funds, and wealth managers are able to perform due diligence to a level that most investors cannot. So it follows that their investment decisions may be more educated. But we also know that bankers and portfolio managers can make mistakes too.
So the fact that Muscle Maker has a low rate of institutional ownership at 4.1% is not an immediate red flag. It just means that something about the company has kept institutional investors from committing -- or the stock is simply flying under their radar.
In conclusion, we see positive market sentiment regarding Muscle Maker because of an analyst consensus of strong upside potential, a buy rating, an average amount of shares sold short, and a very small 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 GRIL:
The stock has trailing 12 month earnings per share (EPS) of $-0.25
Muscle Maker has a trailing 12 month Price to Earnings (P/E) ratio of -5.8 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
Muscle Maker is a Consumer Discretionary company, and the sector average P/E and P/B ratios are 22.33 and 3.12 respectively