During the recent trading sessions stock of Meritor, Inc. (NYSE:MTOR) was gathering the crowd in the stock market. Many experts agree that the truth about a stock is best reflected in the way it moves on the chart. For this stock, the chart has a lot to say about future performance.
How has the stock performed recently?
Meritor, Inc. (NYSE:MTOR) in the last month has increased +14.65%. Shares are now up +104.53% over the past year, outperforming the broad market by 503.52% and outperformed a peer group of similar companies by 620%. After the latest session, which saw the stock close at a price of $21.68, MTOR sits -1.50% below its 52-week high. Meritor, Inc. (NYSE:MTOR) has been trading in a bullish manner, based on the relative positions of the stock’s 20 and 200 day moving averages.
Of course, these surface-level price movements don’t tell us much about the direction that MTOR may be headed in the future. To do this, analysts often study the speed and magnitude of a stock’s price movements with what are known as momentum indicators. The logic is that as a stock’s momentum slows, it may be nearing key support or resistance levels and possibly the end of a current trend. Two such indicators are the RSI (Relative Strength Index) and the Stochastic %k Oscillator, which fluctuate on a scale of 0 to 100. A reading above 70 indicates that a stock is overvalued, and a reading below 30 implies that it is undervalued. The 20-day RSI for MTOR is 75.05%, which suggests that the stock may be primed for a trend reversal or a corrective pullback in price. The 20-day Stochastic %k measure, which sits at 90.27%, tells a similar story, and suggests that MTOR currently trades in overbought territory.
What do the trading volumes reveal?
In addition to price, analysts use volume trends to predict future performance. The level of trading activity in a stock is often a good proxy for the level of interest and enthusiasm for the name within the investment community. A sudden increase in activity can be a sign that investors are trading in anticipation of a catalyst. Meritor, Inc. (MTOR) average trading volume of 1,346,455 during the past month is 34.06% above its average volume over the past year, indicating that investors have been more active than usual in the stock in recent times.
What do the analysts think?
MTOR is currently overvalued by 5.45% relative to the average 1-year price target of $20.56 taken from a group of Wall Street Analysts. The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.40, which implies that analysts are generally neutral in their outlook for MTOR over the next year.
How risky is the stock?
In order to put MTOR’s recent price performance into context, we need to get a sense of how the stock moves in relation to the overall market. Beta, which measures a stock’s price volatility relative to the market, provides the cleanest measure of systematic risk for a stock.
Meritor, Inc. (NYSE:MTOR) has a beta of 2.24, compared to a beta of 1 for the market, which implies that the stock’s price movements are more extreme than the market as a whole. MTOR therefore has a above average level of market risk. During the past couple of weeks, MTOR average daily volatility was 16.49%, which is 12.14 percentage points lower than the average volatility over the past 100 days.