Is Red-Hot Signet Jewelers Stock Just Getting Started?

A short squeeze could fuel additonal gains for SIG

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The last time we checked in with Signet Jewelers Limited (NYSE:SIG), the specialty retailer was enjoying an overdue upgrade. Now, a little over a month later, the stock is a day removed from a record high of $93.61 and shows no signs of stopping.

Signet Jewelers stock is up 220% now in 2021, with several ascending short-term moving averages offering support. Yet at the same time, a healthy 8.6% of SIG's total available float is still sold short. At the stock's average pace of trading, it would take shorts almost six days to buy back their bearish bets.

From a fundamental point of view, Signet Jewelers stock is truly a mixed bag. SIG trades at an extremely attractive price-earnings ratio of 8.56 with a forward dividend of $0.72 and a dividend yield of 0.79%. Signet Jewelers also has a manageable balance sheet with $1.57 billion in cash and $1.52 billion in total debt. However, SIG’s top- and bottom-line growth has been very inconsistent in recent years.

Although SIG’s revenues are up 33% since fiscal 2020, the jewelry company had previously reported three consecutive years of revenue declines. Signet Jewelers’ revenues dropped 16.5% between fiscal 2017 and fiscal 2020. In addition, SIG reported $690 million in net losses for fiscal 2018 and $48.7 million in net losses for fiscal 2020, accumulating a $1.175 billion decrease for fiscal 2018 and a $120 million decrease for fiscal 2020. Nonetheless, Signet Jewelers has posted a strong recovery from the COVID-19 pandemic, and SIG’s trailing 12-month net income is now up to $592 million.

For those wanting to get in on Signet stock's next move, options look like the way to go. The equity's Schaeffer's Volatility Index (SVI) of 46% stands higher than 1% of readings from the past 12 months. This means options traders are pricing in relatively low volatility expectations at the moment. What's more, the security's Schaeffer's Volatility Scorecard (SVS) ranks at 75 out of a potential 100, meaning SIG tends to outperform said volatility expectations, which is great for potential buyers. 

 

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