Tumbling to a price of $47.1 during today's afternoon trading session, shares of Catalent are now -8.17% below their average target price of $51.29. Does this mean the stock will reverse course? Analysts are giving CTLT an average rating of hold and target prices ranging from 44.0 to 58.0 dollars per share.
To understand the market's outlook on the stock, we can look at Catalent'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 6.8% which means the outlook is split.
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 get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of Catalent, institutional investors own 106.3% 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 CTLT, 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 Catalent because of an analyst consensus of some 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 CTLT:
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It has trailing 12 month earnings per share (EPS) of $-1.3 per share
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Catalent has a trailing 12 month Price to Earnings (P/E) ratio of -36.2 while the S&P 500 average is 15.97
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The company has a Price to Book (P/B) ratio of 1.84 in contrast to the S&P 500's average ratio of 2.95
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Catalent is a Health Care company, and the sector average P/E and P/B ratios are 24.45 and 4.16 respectively
