We have noted Sumitomo Mitsui Financial's positive performance during today's afternoon trading session, during which it logged a 3.0% outperformance of the S&P 500. At its current price of $16.73, the company is now trading in range of its average target price of $16.52, which calls into question its ability to keep moving higher. Analysts have given the Commercial Banking stock target prices ranging from $16.52464 to $16.52464 dollars per share, with an average rating of buy.
The market seems to share this optimistic view, since Sumitomo Mitsui Financial has a short interest of only 0.1% (this is the percentage of the share float that is being shorted). Each short position represents an investor's expectation that the price of the stock will decrease 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.
One measure of the market sentiment regarding a stock is its rate of institutional ownership, which in the case of Sumitomo Mitsui Financial stands at 1.9%. This indicates a lower than average rate of institutional ownership -- but what does that have to do with sentiment regarding the stock?
The reason we look at institutional ownership is that institutions such as hedge funds, pension funds, and mutual funds have vast research capabilities. They are often close to management, speaking to them one-on-one and gaining an understanding of the opportunities and challenges they face. Thus, if an institution is willing to place their capital in a company, it's likely that their due diligence has shown it is a safe bet.
In conclusion, we see mixed market sentiment regarding Sumitomo Mitsui Financial because of an analyst consensus of little upside potential, a buy rating, a very low short interest, 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 SMFG:
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The stock has trailing 12 month earnings per share (EPS) of $1.23
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Sumitomo Mitsui Financial has a trailing 12 month Price to Earnings (P/E) ratio of 13.6 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 0.0 in contrast to the S&P 500's average ratio of 4.74
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Sumitomo Mitsui Financial is a Finance company, and the sector average P/E and P/B ratios are 15.92 and 1.78 respectively
