No one could ignore International Paper's price drop during morning trading session, as the stock fell to $55.7, logging a -1.0% underperformance of the S&P 500. The stock is still trading within range of its average target price of $57.87, which may prove to be a resistance point to further declines. Analysts have given the Paper & Paper Products stock target prices ranging from 47.0 to 71.0 dollars per share, with an average rating of buy.
We can use International Paper's short interest as a proxy for determining general market sentiment regarding the stock. The short interest is the percentage of the share float that represents short positions, meaning that the investor believes the stock will decline in the future. Since IP's short interest is 9.5%, the market sentiment is mixed on this stock.
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.
Another way to gauge the sentiment on International Paper is to look at the percentage of institutions that are invested in the stock. In this case, 77.5% 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 towards International Paper because of an analyst consensus of some upside potential, a buy rating, an above average percentage of its shares sold short, and an average number of institutional investors. Investors should not base their decisions on market sentiment only, they should also be aware of a stock's fundamentals before committing.
At a glance, here are some essential statistics you may want to know about IP:
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It has trailing 12 month earnings per share (EPS) of $1.57 per share
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International Paper has a trailing 12 month Price to Earnings (P/E) ratio of 35.5 while the S&P 500 average is 29.3
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The company has a Price to Book (P/B) ratio of 2.37 in contrast to the S&P 500's average ratio of 4.74
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International Paper is a Basic Materials company, and the sector average P/E and P/B ratios are 24.53 and 2.64 respectively
