Analyzing the Positive Factors Driving VALE Stock

By Blake Campbell • Tuesday, September 10 15:07 • Permanent Link

Tumbling to a price of $9.88 during today's afternoon trading session, shares of Vale are now -34.3% below their average target price of $15.03. Does this mean the stock will reverse course? 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 rosy outlook, since Vale has a short interest of only 1.6%. 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.

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.

We can make inferences about the market sentiment surrounding Vale by analyzing its rate of institutional ownership. If institutions such as hedge funds and pension funds are the primary shareholders of a corporation, it most likely means that its shares are a good investment according to those institutions' analysts.

At 16.4%, the rate of institutional ownership is average, indicating that a sufficient number of institutions have concluded that it is a stable investment. Beware, however, that the rate of institutional ownership could also indicate an ongoing proxy battle or takeover attempt -- so you should also periodically check the news about a stock whose institutional ownership you are tracking.

Overall, there is mixed market sentiment towards 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. 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 VALE:

It has trailing 12 month earnings per share (EPS) of $2.25 per share
Vale has a trailing 12 month Price to Earnings (P/E) ratio of 4.4 while the S&P 500 average is 28.21
The company has a Price to Book (P/B) ratio of 0.21 in contrast to the S&P 500's average ratio of 4.71
Vale is a Basic Materials company, and the sector average P/E and P/B ratios are 23.66 and 2.69 respectively

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.