Tumbling to a price of $23.76 during today's afternoon trading session, shares of Summit Therapeutics are now -28.94% below their average target price of $33.44. Does this mean the stock will reverse course? Analysts are giving SMMT an average rating of buy and target prices ranging from 22.287218 to 44.616844 dollars per share.
The market, on the other hand, is a bit more pessimistic. Summit Therapeutics's short interest -- meaning the percentage of its share float that is being shorted on an expectation of a price decline -- is quite high at 16.8%. The float includes only shares that are available for public trading, and excludes preferred shares.
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.
A possible indicator of market sentiment on a stock (besides its share price, of course) is the portion of institutional investors that make up its shareholders. Institutions such as banks, hedge funds, and wealth managers deploy significant resources towards identifying good investments. If they are invested heavily in a given company's stock, it could mean it's a good investment. Or it could mean the company is being targeted by a takeover attempt.
For what it's worth, institutions own 11.7% of Summit Therapeutics's shares, which is an average amount. It means that many institutions are invested, but not to the extent that they would be in a stock such as Apple or Amazon, whose institutional ownership rates hover around 60%. Bear in mind that institutional ownership is just one piece of the puzzle in determining market sentiment, and you should not consider this factor alone in making an investment decision.
To sum up, Summit Therapeutics is probably the subject of mixed market sentiment because of an analyst consensus of strong upside potential, a buy rating, an unusually large proportion of its shares sold short, 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 SMMT:
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The stock has trailing 12 month earnings per share (EPS) of $-0.23
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Summit Therapeutics has a trailing 12 month Price to Earnings (P/E) ratio of -103.3 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 40.0 in contrast to the S&P 500's average ratio of 4.74
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Summit Therapeutics is a Health Care company, and the sector average P/E and P/B ratios are 26.07 and 3.53 respectively