No one could ignore Eaton's price drop during evening trading session, as the stock fell to $227.95, logging a -3.0% underperformance of the S&P 500. The stock is still trading within range of its average target price of $233.53, which may prove to be a resistance point to further declines. Analysts have given the Farm & Heavy Construction Machinery stock target prices ranging from 193.0 to 270.0 dollars per share, with an average rating of buy.
The market seems to share this optimistic view, since Eaton has a short interest of only 0.9% (this is the percentage of the share float that is being shorted). Each short position represents an investor's expectation that the price of the stock will decrease 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.
Another way to gauge the sentiment on Eaton is to look at the percentage of institutions that are invested in the stock. In this case, 85.2% 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 Eaton because of an analyst consensus of some upside potential, a buy rating, a very low short interest, 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 ETN:
It has trailing 12 month earnings per share (EPS) of $6.76 per share
Eaton has a trailing 12 month Price to Earnings (P/E) ratio of 33.7 while the S&P 500 average is 15.97
The company has a Price to Book (P/B) ratio of 5.07 in contrast to the S&P 500's average ratio of 2.95
Eaton is a Technology company, and the sector average P/E and P/B ratios are 27.16 and 6.23 respectively