With a sudden -4.2% drop to $110.81, Cardinal Health has Wall Street wondering if its shares will keep moving past its target price of $115.29. With an average rating of buy, and analysts assigning target prices from 96.0 to 133.0 dollars per share, investors will be betting heavily on the Pharmaceutical stock's next move.
For the greater market's outlook on the stock, we can use Cardinal Health'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 5.9% 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.
Another way to gauge the sentiment on Cardinal Health is to look at the percentage of institutions that are invested in the stock. In this case, 89.9% 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 Cardinal Health 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. 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 CAH:
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It has trailing 12 month earnings per share (EPS) of $2.52 per share
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Cardinal Health has a trailing 12 month Price to Earnings (P/E) ratio of 44.0 while the S&P 500 average is 15.97
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Cardinal Health is a Health Care company, and the sector average P/E and P/B ratios are 30.21 and 4.08 respectively
