Tumbling to a price of $54.68 during today's morning trading session, shares of CVS Health are now -36.59% below their average target price of $86.22. Does this mean the stock will reverse course? Analysts are giving CVS an average rating of buy and target prices ranging from 74.0 to 99.0 dollars per share.
The market seems to share this rosy outlook, since CVS Health has a short interest of only 1.4%. 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 CVS Health is to look at the percentage of institutions that are invested in the stock. In this case, 82.5% 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.
To sum up, CVS Health is probably the subject of positive market sentiment because of an analyst consensus of strong upside potential, a buy rating, a very low short interest, 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 CVS:
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The stock has trailing 12 month earnings per share (EPS) of $6.47
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CVS Health has a trailing 12 month Price to Earnings (P/E) ratio of 8.5 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 0.92 in contrast to the S&P 500's average ratio of 2.95
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CVS Health is a Consumer Staples company, and the sector average P/E and P/B ratios are 21.21 and 4.12 respectively
