Short selling data can help active investors manage risk. Short sellers tend to be well-informed, high-conviction traders. If they’re shorting a stock, there’s usually a good reason they are doing so.
In this report, we are going to analyze the short selling data on Elekta AB (EKTAB:SS). Elekta is a Swedish company that develops solutions for the treatment of cancer and brain disorders. The company offers systems for radiation therapy as well as software systems that enhance workflow efficiency throughout the entire spectrum of cancer care. It is listed on the OMX Nordic Exchange Stockholm and currently has a market capitalization of SEK 46 billion.
Elekta AB: Short Selling Data
The short selling data on Elekta reveals that this year, short interest has increased significantly. At the start of the year, 14.41 million shares were on loan, which represented short interest of 3.9%. However, at present, 17.99 million shares are loan, representing short interest of 4.9%. So, short interest has risen by 26% year to date. This tells us that sentiment towards the stock from institutions has become more bearish this year.
In terms of who is shorting Elekta stock, we can see that there are five institutions that currently have short positions above the disclosure threshold of 0.50%. AKO CAPITAL LLP, which manages around USD $25 billion across long-only and long-short equity funds, currently holds the largest short position at 1.60% of the total shares in issue. This short position, which is worth around SEK 730 million (€71.8 million), was disclosed on 20 May. More recently, Marshall Wace LLP – one of the most active short sellers in the European markets – disclosed its position of 0.50% on 22 June.
Why Are Short Sellers Targeting Elekta?
As for why short sellers are targeting Elekta, it is most likely related to the company’s profitability and valuation.
Back in February, the stock took a hit after the company posted a lower-than-expected profit for Q3 and did not provide guidance. JP Morgan noted at the time that adjusted profit was 14% below its forecasts. Shortly after, the broker downgraded the stock to ‘underweight’ from ‘neutral’ citing an unattractive risk-reward profile. It stated that it expects order growth to restrict sales growth, pointing out that orders were slowing even pre-Covid-19.
More recently, on 28 May, Elekta posted EBITA of SEK 743 million for Q4. This was well below the consensus forecast. Analysts had been expecting EBITA of SEK 817 million.
Despite the recent earnings misses, the stock’s valuation remains high. At present, Elekta has a forward-looking price-to-earnings (P/E) ratio of 31. The short sellers clearly believe that at that valuation, the stock is overvalued.
It’s worth pointing out that not everyone is bearish on Elekta. Recently, the company’s President and CEO spent around SEK 1 million on stock.
However, given Elekta’s high level of short interest, we think caution is warranted towards the stock right now.