One of the standouts of today's morning trading session was Summit Therapeutics, which logged a 3.6% performance and outperformed the S&P 500 by 4.0%. The Pharmaceutical stock is now trading at $18.82 per share and may still have upside potential because it is still -41.92% under its average target price of $32.41. Analysts have set target prices ranging from $21.992073 to $42.828484 dollars per share, and have given the stock an average rating of buy.
For the greater market's outlook on the stock, we can use Summit Therapeutics's short interest as a proxy. The short interest represents the proportion of the float's shares that are tied to short positions, meaning that the investor believes the stock will decline in the future. Here, the stock's short interest is 14.8% which means the outlook is split.
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.
We can make inferences about the market sentiment surrounding Summit Therapeutics 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 11.7%, 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 on Summit Therapeutics because its an analyst consensus of strong upside potential, a buy rating, an above average percentage of its shares sold short, and a very small 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 SMMT's recent cash flows:
| Date Reported | Cash Flow from Operations ($ k) | Capital expenditures ($ k) | Free Cash Flow ($ k) | YoY Growth (%) |
|---|---|---|---|---|
| 2023 | -76,760 | 128 | -76,888 | -82.17 |
| 2022 | -41,582 | 624 | -42,206 | 42.1 |
| 2021 | -72,587 | 306 | -72,893 | -50.2 |
| 2020 | -48,111 | 421 | -48,532 | -37.63 |
| 2019 | -35,106 | 157 | -35,263 | -59.06 |
| 2018 | -21,501 | 668 | -22,169 |
