Tumbling to a price of $15.18 during today's morning trading session, shares of Prudential are now -41.81% below their average target price of $26.08. Does this mean the stock will reverse course? Analysts are giving PUK an average rating of buy and target prices ranging from 26.08 to 26.08 dollars per share.
The market seems to share this optimistic view, since Prudential has a short interest of only 0.0% (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 measure of the market sentiment regarding a stock is its rate of institutional ownership, which in the case of Prudential stands at 2.3%. This indicates a lower than average rate of institutional ownership -- but what does that have to do with sentiment regarding the stock?
The reason we look at institutional ownership is that institutions such as hedge funds, pension funds, and mutual funds have vast research capabilities. They are often close to management, speaking to them one-on-one and gaining an understanding of the opportunities and challenges they face. Thus, if an institution is willing to place their capital in a company, it's likely that their due diligence has shown it is a safe bet.
To sum up, Prudential is probably the subject of mixed market sentiment 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 PUK:
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The stock has trailing 12 month earnings per share (EPS) of $0.64
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Prudential has a trailing 12 month Price to Earnings (P/E) ratio of 23.7 compared to the S&P 500 average of 29.3
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The company has a Price to Book (P/B) ratio of 2.57 in contrast to the S&P 500's average ratio of 4.74
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Prudential is a Finance company, and the sector average P/E and P/B ratios are 20.04 and 1.86 respectively
