Is Institutional Interest Waning in Diageo plc (NYSE:DEO)?

According to the latest filings, institutions owning shares of Diageo plc (NYSE:DEO) have decreased their positions by -1.07%.  Institutions now own 11.90% of the company.

Investors might be preparing to do a portfolio evaluation as we move towards the close of the year. There may be plenty of big winners from the first half of the year, but there may also be some underperformers that need to be reviewed. Making sure that the portfolio stays in balance can help prepare the investor for success over the next few quarters. With the stock market still riding high, investors may be wondering how to play the market into the near future. If market momentum starts to shift, investors may need to be ready to make some tougher decisions. Being prepared for any market situation can help the investor cope with rough waters when the time comes.

Big organizations that control vast sums of money, such as mutual funds, insurance companies or pension funds, that buy securities are known as “institutional investors”.  Unlike individual investors, institutional investors trade in massive blocks of 10,000 or more shares per transaction.  The sheer size of these trades significantly affect the price of a share. 

TECHNICAL ANALYSIS

Technical analysts have little regard for the value of a company. They use historic price data to observe stock price patterns to predict the direction of that price going forward.  Analysts use common formulas and ratios to accomplish this.

Diageo plc (NYSE:DEO)’s RSI (Relative Strength Index) is 55.39.  RSI is a technical indicator of price momentum, comparing the size of recent gains to the size of recent losses and establishes oversold and overbought positions.

FUNDAMENTAL ANALYSIS

Fundamental analysis examines the financial elements of a company, for example; sales, cash flow, profit and balance sheet.  These numbers are then crunched to create theoretical valuations of companies. 

Earnings Per Share (EPS) is the earnings made by a company divided by their number of shares.  EPS enables the earnings of a company to easily be compared to their competitors. The higher the number, the more profit per dollar is being made on investor capital.  Diageo plc’s EPS is 5.66.  Their EPS should be compared to other companies in the Consumer Goods sector.

Price-to-Earnings Ratio is the current share price divided by annual earnings per share.  P/E provides a number that details how many years of earnings it will take a stock to recoup the value of one share at current price levels.  Easy to calculate and understand, P/E is an extremely common ratio that is used to compare valuations of stocks against each other relatively.  Diageo plc’s  P/E ratio is 25.24. 

Projected Earnings Growth (PEG) is a forward looking ratio based on anticipated earnings growth.  PEG is created by dividing P/E by the projected rate of earnings growth.  Diageo plc’s  PEG is 3.61.

RETURNS AND RECOMMENDATION

Shareholders can expect a return on equity of 30.50%.  Calculated by dividing Diageo plc’s annual earnings by its total assets, investors will note a return on assets of 10.20%.  Finally, Diageo plc’s return on investment stands at 13.70% when you divide the shareholder’s return by the cost. 

The consensus analysts recommendation at this point stands at 1.00 for Diageo plc (NYSE:DEO).  This is based on a 1-5 scale where 1 indicates a Strong Buy and 5 a Strong Sell.

Disclaimer: The views, opinions, and information expressed in this article are those of the authors and do not necessarily reflect the official policy or position of any company stakeholders, financial professionals, or analysts. Examples of analysis performed within this article are only examples. They should not be utilized to make stock portfolio or financial decisions as they are based only on limited and open source information. Assumptions made within the analysis are not reflective of the position of any analysts or financial professionals.