Endo (ENDP) has taken investors on a wild ride over the past year. The stock reached a 52-week high after a blow out earnings report in Q2 2018. It has since felt headwinds from investors looking to take profit and from events outside its control. My previous article summed up my frustration with the stock:
In my opinion, Endo International (ENDP) is one of the more perplexing names in the stock market. Just when you think you have a bead on the company’s earnings and the story, the narrative suddenly changes. When you think you have the stock properly valued, investors and Wall Street analysts suddenly have a different spin and assign value much different from yours. I understand how irrational markets can be, but at some point ENDP should trade based on its expected revenue and earnings growth. It practically has to, right?
The fact that the lion’s share of the shares outstanding are owned by institutions should be a good thing. I would expect institutions to be more sophisticated than retail investors. I would also expect them to assign value to ENDP based on some type of math related to revenue, EBITDA, earnings or cash flow. I understand these types of metrics. However, sentiment or how someone feels about a stock are a lot more nebulous.
The stock trades based more on sentiment than on earnings fundamentals. Until relevant news comes out short sellers could continue to manipulate the shares. Read more: