Shares of Series shot up to $221.76 during today's afternoon trading session -- an increase of 2.9% that brings the stock 13.17% over its average analyst target price of $195.96. This may imply limited upside for the Data Processing Services stock, whose analysts give it a consensus rating of buy, and target prices spanning from $75.0 to $235.0 dollars per share.
The market, on the other hand, is a bit more pessimistic. Series'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 17.9%. The float includes only shares that are available for public trading, and excludes preferred shares.
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.
One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of Series, institutional investors own 87.7% of the shares. This would indicate a positive sentiment towards the stock among institutions. What does this really tell us?
Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in RDDT, it probably means they believe it is a solid investment choice. But it could also mean they are buying up shares in an effort to acquire the company or get seats on the board of directors. Also bear in mind that institutions are fallible (just maybe not quite as fallible as the average retail investor), so they may simply be wrong when they think they've found a good stock.
In conclusion, we see mixed market sentiment regarding Series because of an analyst belief that shares are overpriced, a buy rating, an unusually large proportion of its shares sold short, and a significant 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 RDDT:
-
The stock has trailing 12 month earnings per share (EPS) of $2.24
-
Series has a trailing 12 month Price to Earnings (P/E) ratio of 99.0 compared to the S&P 500 average of 29.3
-
The company has a Price to Book (P/B) ratio of 17.38 in contrast to the S&P 500's average ratio of 4.74
-
Series is a Technology company, and the sector average P/E and P/B ratios are 30.44 and 4.19 respectively
