Rocketing to a price of $10.89 during today's morning trading session, shares of Vale are still -28.02% below their average target price of $15.13. Could there be more upside potential for the stock? Analysts are giving VALE an average rating of buy and target prices ranging from $11.0 to $18.0 dollars per share.
The market seems to share this optimistic view, since Vale has a short interest of only 1.6% (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.
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.
A possible indicator of market sentiment on a stock (besides its share price, of course) is the portion of institutional investors that make up its shareholders. Institutions such as banks, hedge funds, and wealth managers deploy significant resources towards identifying good investments. If they are invested heavily in a given company's stock, it could mean it's a good investment. Or it could mean the company is being targeted by a takeover attempt.
For what it's worth, institutions own 16.5% of Vale's shares, which is an average amount. It means that many institutions are invested, but not to the extent that they would be in a stock such as Apple or Amazon, whose institutional ownership rates hover around 60%. Bear in mind that institutional ownership is just one piece of the puzzle in determining market sentiment, and you should not consider this factor alone in making an investment decision.
In conclusion, we see mixed market sentiment regarding Vale because of an analyst consensus of strong upside potential, a buy rating, a very low short interest, and a very small 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 VALE:
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The stock has trailing 12 month earnings per share (EPS) of $2.25
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Vale has a trailing 12 month Price to Earnings (P/E) ratio of 4.8 compared to the S&P 500 average of 28.21
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The company has a Price to Book (P/B) ratio of 0.23 in contrast to the S&P 500's average ratio of 4.71
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Vale is a Basic Materials company, and the sector average P/E and P/B ratios are 23.66 and 2.69 respectively
