Tumbling to a price of $64.02 during today's afternoon trading session, shares of Legend Biotech are now -25.96% below their average target price of $86.47. Does this mean the stock will reverse course? Analysts are giving LEGN an average rating of buy and target prices ranging from 65.0 to 100.0 dollars per share.
For the greater market's outlook on the stock, we can use Legend Biotech'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 10.8% 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 Legend Biotech, institutional investors own 53.7% 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 LEGN, 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, Legend Biotech is probably the subject of positive market sentiment because of an analyst consensus of strong upside potential, a buy rating, an above average percentage of its 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 LEGN:
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The stock has trailing 12 month earnings per share (EPS) of $-2.96
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Legend Biotech has a trailing 12 month Price to Earnings (P/E) ratio of -21.6 compared to the S&P 500 average of 15.97
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The company has a Price to Book (P/B) ratio of 9.3 in contrast to the S&P 500's average ratio of 2.95
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Legend Biotech is a Health Care company, and the sector average P/E and P/B ratios are 30.21 and 4.08 respectively
