During today's afternoon trading session, Vertiv took the market by storm, rocketing to $84.78 per share despite it now being above its mean target price of $79.78. This 5.0% movement implies there may not be much more room for upwards movement for the stock -- if its analysts are to be believed. They are giving the Farm & Heavy Construction Machinery stock on average rating of buy, with target prices ranging from 56.0 to 100.0 dollars per share.
The market seems to share this rosy outlook, since Vertiv has a short interest of only 2.6%. This represents the percentage of the share float that is being shorted, and each short position stands for an investor's expectation that the price of the stock will go down 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.
Another way to gauge the sentiment on Vertiv is to look at the percentage of institutions that are invested in the stock. In this case, 89.3% 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.
In conclusion, we see positive market sentiment regarding Vertiv because of an analyst consensus of little 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 VRT:
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The stock has trailing 12 month earnings per share (EPS) of $1.19
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Vertiv has a trailing 12 month Price to Earnings (P/E) ratio of 71.2 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 16.06 in contrast to the S&P 500's average ratio of 2.95
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Vertiv is a Technology company, and the sector average P/E and P/B ratios are 35.0 and 7.92 respectively
