During the recent trading sessions stock of Cardinal Health, Inc. (NYSE:CAH) was gathering the crowd in the stock market. Many analysts use price trends and patterns to predict future performance, and we can glean some important insights about CAH by examining the chart.
How has the stock performed recently?
Cardinal Health, Inc. (NYSE:CAH) in the last month has increased +2.20%. Shares are now down -10.36% over the past year, underperforming the broad market by -159.78% and outperformed a peer group of similar companies by 123%. After the latest session, which saw the stock close at a price of $67.46, CAH sits -20.52% below its 52-week high. Cardinal Health, Inc. (NYSE:CAH) has been trading in a bearish 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 CAH may be headed in the future. If we want to get a sense of CAH’s future performance, we have to look at the speed and size of these price movements. Using what are known as momentum indicators, we can use the stock’s price momentum to get a sense of whether the stock is in the midst of, or nearing 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 CAH is 41.79%, which suggests that the stock is not particularly expensive or cheap, and not predisposed to a reactive price movement based on this measure. The 20-day Stochastic %k measure, which sits at 78.75%, tells a different story, and suggests that CAH currently trades in overbought territory.
What do the trading volumes reveal?
Volume patterns are useful for gauging the level of conviction behind price changes, and can be used to make predictions about future price movements. A sudden increase in a stock’s activity can be a sign that investors are trading in anticipation of a catalyst, or that investors feel very strongly in one way or the other about the future direction of a stock. Cardinal Health, Inc. (CAH) average trading volume of 1,948,225 during the past month is 12.63% below its average volume over the past year, indicating that investors have been less active than usual in the stock in recent times.
What do the analysts think?
CAH is currently undervalued by -8.47% relative to the average 1-year price target of $73.70 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 2.80, which implies that analysts are generally neutral in their outlook for CAH over the next year.
How risky is the stock?
No study on the valuation of a stock is complete without taking into account risk. When analyzing the systematic risk associated with a stock, analysts look at beta, which measures the stock’s volatility relative to the overall market.
Cardinal Health, Inc. (NYSE:CAH) has a beta of 0.86, compared to a beta of 1 for the market, which implies that the stock’s price movements are less extreme than the market as a whole. CAH therefore has a below average level of market risk. During the past couple of weeks, CAH average daily volatility was 17.91%, which is 2.22 percentage points lower than the average volatility over the past 100 days.