ROIV Is Down - How Does the Market See the Stock?

By Scott Lee • Monday, December 18 17:00 • Permanent Link

One of the standouts of today's evening trading session has been Roivant Sciences, which logged a -2.2% drop and underperformed the S&P 500 by -3.0%. The Pharmaceutical stock is now trading at $10.91 per share and is -30.38% below its average target price of $15.67. Analysts have set target prices ranging from $11.0 to 23.0 dollars per share, and have given the stock an average rating of buy.

For the greater market's outlook on the stock, we can use Roivant Sciences's short interest as a proxy. The short interest represents the proportion of the float's shares that are tied to short positions, meaning that the investor believes the stock will decline in the future. Here, the stock's short interest is 7.1% 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 Roivant Sciences, institutional investors own 67.9% 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 ROIV, 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, Roivant Sciences is probably the subject of positive market sentiment because of an analyst consensus of strong upside potential, a buy rating, an average amount of shares sold short, and an average 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 ROIV:

The stock has trailing 12 month earnings per share (EPS) of $-1.47
Roivant Sciences has a trailing 12 month Price to Earnings (P/E) ratio of -7.4 compared to the S&P 500 average of 15.97
The company has a Price to Book (P/B) ratio of 9.21 in contrast to the S&P 500's average ratio of 2.95
Roivant Sciences is a Health Care company, and the sector average P/E and P/B ratios are 30.21 and 4.08 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.