Yahoo Finance Cobham plc’s (LON:COB) Insiders Ramped Up Holdings – Should You?
Cobham plc provides a range of technologies and services to commercial, defense, aerospace, space, and security markets in the United Kingdom, the United States, other European countries, Australia, Asia, and internationally. Cobham’s insiders have invested 155,768 shares in the within the past three months. It is widely considered that insider buying stock in their own companies is potentially a bullish signal. A research published in The MIT Press (1998) concluded that stocks following insider buying outperformed the market by 4.5%. But these signals may not be sufficient to gain confidence on whether to invest. Today we will evaluate whether these decisions are bolstered by analysts’ expectations of future growth as well as recent share price movements.
Check out our latest analysis for Cobham
Which Insiders Are Buying?
Over the past three months, more shares have been bought than sold by Cobham’s’ insiders. In total, individual insiders own less than one million shares in the business, or around 0.02% of total shares outstanding. Latest buying activities involved the following insiders: David Lockwood (management and board member) and David Mellors (management and board member) .
Is Future Growth Outlook As Bullish?
Analysts’ expectations for earnings over the next 3 years of -0.45% provides negative outlook for the business, however, this is contrary to the signal company insiders are sending with their net buying activity. Probing further into annual growth rates,analysts anticipate negative growth in its top-line over the next year, which indicates the company may be facing some headwinds. This is expected to impact its bottom line next year given the large negative growth rate expected, indicating cost-cutting may not be able to pull it through into a positive growth region yet. However, company insiders appear to know something the market doesn’t and have been investing more money into the stock. This may mean they believe in a turnaround or believe the stock is well-undervalued by negative market sentiment.
Can Share Price Volatility Explain The Buy?
An alternative reason for recent trades could be insiders taking advantage of the share price volatility. A correlation could mean directors are trading on market inefficiencies based on their belief of the company’s intrinsic value. Cobham’s shares ranged between £1.34 and £1.13 over the past three months. This indicates some volatility with a share price change of of 17.85%. Insiders’ purchases may not be driven by this movement but perhaps their view of the company’s growth in the future or simply their individual portfolio rebalancing.
Next Steps:
Cobham’s insider meaningful buying activity tells us the shares are currently in favour, though negative growth in expected earnings contests this assumption, and the relatively stable stock price may not warrant exploiting any mispricing. However, while insider transactions could be a helpful signal, it is definitely not sufficient on its own to make an investment decision. I’ve put together two important aspects you should further research:
Financial Health: Does Cobham have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of Cobham? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
