Despite today's 13.2% jump to $303.95, Rockwell Automation may soon be running into resistance as it is now within range of its average analyst target price of $298.62. With an average rating of buy, and analysts assigning target prices from 215.0 to 355.0 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 rosy outlook, since Rockwell Automation has a short interest of only 3.1%. This represents the percentage of the share float that is being shorted, and each short position stands for an investor's expectation that the price of the stock will go down in the future.
Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.
Another way to gauge the sentiment on Rockwell Automation is to look at the percentage of institutions that are invested in the stock. In this case, 83.5% of the shares are held by pension, mutual, and hedge funds, which shows that these institutions probably have strong confidence in the stock.
If institutions are invested in a particular stock, it shows in most cases that they have performed quality research and concluded that it is a good investment. In some cases, however, increases in institutional ownership could be a sign of a takeover attempt or proxy fight, which can actually injure share prices. Also, institutions are not infallible, and can certainly make miscalculations -- often with spectacular results.
Overall, there is mixed market sentiment on Rockwell Automation because its an analyst consensus of little 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 ROK's recent cash flows:
| Date Reported | Cash Flow from Operations ($ k) | Capital expenditures ($ k) | Free Cash Flow ($ k) |
|---|---|---|---|
| 2024 | nan | 224,700 | nan |
| 2023 | 1,374,600 | 160,500 | 1,214,100 |
| 2022 | 823,100 | 141,100 | 682,000 |
| 2021 | 1,261,000 | 120,300 | 1,140,700 |
| 2020 | 1,120,500 | 113,900 | 1,006,600 |
| 2019 | 1,182,000 | 132,800 | 1,049,200 |
