With a sudden -2.2% drop to $236.36, Eaton has Wall Street wondering if its shares will keep moving past its target price of $243.94. With an average rating of buy, and analysts assigning target prices from 193.0 to 275.0 dollars per share, investors will be betting heavily on the Farm & Heavy Construction Machinery stock's next move.
The market seems to share this optimistic view, since Eaton has a short interest of only 1.0% (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.
When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the 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 Eaton, institutional investors own 86.0% 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 ETN, 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 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 $7.47 per share
Eaton has a trailing 12 month Price to Earnings (P/E) ratio of 31.6 while the S&P 500 average is 15.97
The company has a Price to Book (P/B) ratio of 5.13 in contrast to the S&P 500's average ratio of 2.95
Eaton is a Industrials company, and the sector average P/E and P/B ratios are 22.19 and 4.06 respectively