Is Overall Sentiment on Weyerhaeuser Company Bearish?

By Chris Stiles • Tuesday, November 21 12:21 • Permanent Link

Tumbling to a price of $31.77 during today's afternoon trading session, shares of Weyerhaeuser Company are now -14.91% below their average target price of $37.33. Does this mean the stock will reverse course? Analysts are giving WY an average rating of buy and target prices ranging from 36.0 to 40.0 dollars per share.

The market seems to share this optimistic view, since Weyerhaeuser Company has a short interest of only 2.0% (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.

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 Weyerhaeuser Company, institutional investors own 85.7% 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 WY, 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.

To sum up, Weyerhaeuser Company is probably the subject of mixed market sentiment because of an analyst consensus of some upside potential, a buy rating, an average amount of 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 WY:

The stock has trailing 12 month earnings per share (EPS) of $0.87
Weyerhaeuser Company has a trailing 12 month Price to Earnings (P/E) ratio of 36.5 compared to the S&P 500 average of 15.97
The company has a Price to Book (P/B) ratio of 2.27 in contrast to the S&P 500's average ratio of 2.95
Weyerhaeuser Company is a Real Estate company, and the sector average P/E and P/B ratios are 24.81 and 2.24 respectively

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.