Unveiling the Momentum Driving BHP Shares

By Naomi Wentworth • Sunday, December 01 10:10 • Permanent Link

Rocketing to a price of $52.65 during today's morning trading session, shares of BHP are still -7.31% below their average target price of $56.8. Could there be more upside potential for the stock? Analysts are giving BHP an average rating of buy and target prices ranging from $51.0 to $66.0 dollars per share.

The market seems to share this optimistic view, since BHP has a short interest of only 0.4% (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 tell how the market is perceiving a stock is to look to its rate of institutional ownership. With their vast resources, hedge funds, pension funds, and wealth managers are able to perform due diligence to a level that most investors cannot. So it follows that their investment decisions may be more educated. But we also know that bankers and portfolio managers can make mistakes too.

So the fact that BHP has a low rate of institutional ownership at 3.8% is not an immediate red flag. It just means that something about the company has kept institutional investors from committing -- or the stock is simply flying under their radar.

In conclusion, we see mixed market sentiment regarding BHP because of an analyst consensus of some 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 BHP:

The stock has trailing 12 month earnings per share (EPS) of $3.11
BHP has a trailing 12 month Price to Earnings (P/E) ratio of 16.9 compared to the S&P 500 average of 29.3
The company has a Price to Book (P/B) ratio of 5.96 in contrast to the S&P 500's average ratio of 4.74
BHP is a Energy company, and the sector average P/E and P/B ratios are 13.62 and 1.86 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.