Despite today's 1.7% jump to $98.08, Ingersoll Rand may soon be running into resistance as it is now within range of its average analyst target price of $101.8. With an average rating of buy, and analysts assigning target prices from 88.0 to 115.0 dollars per share, investors will be asking themselves if the Farm & Heavy Construction Machinery stock can sustain this bullish run.
The market seems to share this optimistic view, since Ingersoll Rand has a short interest of only 2.5% (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.
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.
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 Ingersoll Rand, institutional investors own 100.2% of the shares. This would indicate a positive sentiment towards the stock among institutions. 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 IR, 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 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.
Overall, there is mixed market sentiment on Ingersoll Rand because its an analyst consensus of some upside potential, a buy rating, an average amount of shares sold short, and a significant number of institutional investors. Warren Buffett famously said that in the short term, markets are voting mechanisms, but in the long term, they are weighing mechanisms. This means that long term investors should be aware of a stock's fundamentals before committing.
Buffett was one of the fist investors to focus on free cash flow as a yardstick for a company's health. Here are IR's recent cash flows:
| Date Reported | Cash Flow from Operations ($ k) | Capital expenditures ($ k) | Free Cash Flow ($ k) | YoY Growth (%) |
|---|---|---|---|---|
| 2023 | 1,377,400 | 105,400 | 1,272,000 | 65.02 |
| 2022 | 865,400 | 94,600 | 770,800 | 36.74 |
| 2021 | 627,800 | 64,100 | 563,700 | -35.38 |
| 2020 | 914,300 | 42,000 | 872,300 | 185.63 |
| 2019 | 343,300 | 37,900 | 305,400 | -22.15 |
| 2018 | 444,500 | 52,200 | 392,300 |
