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The Math Shows RALS Can Go To $41

By Dividend Channel Staff, Friday, August 18, 9:52 AM ET
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Looking at the underlying holdings of the ETFs in our coverage universe at ETF Channel, we have compared the trading price of each holding against the average analyst 12-month forward target price, and computed the weighted average implied analyst target price for the ETF itself. For the ProShares RAFI Long/Short ETF (AMEX:RALS), we found that the implied analyst target price for the ETF based upon its underlying holdings is $41.38 per unit.

With RALS trading at a recent price near $37.61 per unit, that means that analysts see 10.03% upside for this ETF looking through to the average analyst targets of the underlying holdings. Three of RALS's underlying holdings with notable upside to their analyst target prices are Delek US Holdings Inc (NYSE:DK), PDL BioPharma Inc (NASDAQ:PDLI), and McDermott International Inc (NYSE:MDR). Although DK has traded at a recent price of $20.88/share, the average analyst target is 30.37% higher at $27.22/share. Similarly, PDLI has 28.21% upside from the recent share price of $2.73 if the average analyst target price of $3.50/share is reached, and analysts on average are expecting MDR to reach a target price of $7.12/share, which is 25.22% above the recent price of $5.69. Below is a twelve month price history chart comparing the stock performance of DK, PDLI, and MDR:

DK, PDLI, and MDR Relative Performance Chart

Below is a summary table of the current analyst target prices discussed above:

Name Symbol Recent Price Avg. Analyst 12-Mo. Target % Upside to Target
ProShares RAFI Long/Short ETF RALS $37.61 $41.38 10.03%
Delek US Holdings Inc DK $20.88 $27.22 30.37%
PDL BioPharma Inc PDLI $2.73 $3.50 28.21%
McDermott International Inc MDR $5.69 $7.12 25.22%

Are analysts justified in these targets, or overly optimistic about where these stocks will be trading 12 months from now? Do the analysts have a valid justification for their targets, or are they behind the curve on recent company and industry developments? A high price target relative to a stock's trading price can reflect optimism about the future, but can also be a precursor to target price downgrades if the targets were a relic of the past. These are questions that require further investor research.

The average analyst target price data upon which this article was based, is courtesy of data provided by Zacks Investment Research via Quandl.com.
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This Article's Word Cloud:   Below   BioPharma   Delek   FREEGet   Holdings   Long   McDermott   NYSE   PDLI   ProShares   RAFI   RALS   Short   Target   Zacks   analyst   analysts   average   background   based   border   bottom   color   data   from   have   hctblstyle   holdings   implied   latest   month   padding   price   prices   recent   report   research   share   solid   stock   target   targets   that   these   trading   underlying   unit   upon   upside   which

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