Yahoo Finance Are Insiders Too Confident In Polypipe Group plc (LON:PLP)?
Polypipe Group plc, through its subsidiaries, designs, develops, and manufactures plastic piping systems, water management solutions, and ventilation systems in the United Kingdom, other European countries, and internationally. Polypipe Group’s insiders have invested 140.00k shares in the small-cap stocks within the past three months. A well-known argument is that insiders investing more in their own companies’ shares sends an optimistic signal. A research published in The MIT Press (1998) concluded that stocks following insider buying outperformed the market by 4.5%. However, it may not be sufficient to base your investment decision merely on these signals. I’ve analysed two possible reasons driving the insiders’ decision to ramp up their investment of late. View out our latest analysis for Polypipe Group
Who Are The Insiders?
There were more Polypipe Group insiders that have bought shares than those that have sold. In total, individual insiders own over 9.83 million shares in the business, which makes up around 4.92% of total shares outstanding.
Is Future Growth Outlook As Bullish?
Analysts’ expectations for earnings over the next 3 years of 39.74% provides a great outlook going forward which is consistent with the signal company insiders are sending with their net buying activity. Delving deeper into the line items, analysts anticipate a restrained level of top-line growth over the next year, but a strong double-digit earnings growth of 22.35%. This may mean the company’s cost-cutting initiative will be significant enough to boost earnings. Insider confidence in the company could be signalled by their net buying activity as they expect sustained growth moving forward. Or they may believe share price is below intrinsic value, offering an opportunity to buy.
Did Insiders Buy On Share Price Volatility?
Another factor we should consider is whether the timing of these insider transactions coincide with any significant share price movements. Volatility provides an opportunity to trade on market inefficiencies when the stock is under-priced compared to the stock’s intrinsic value. In the past three months, Polypipe Group’s share price reached a high of £4.24 and a low of £3.48. This indicates moderate volatility with a share price movement of 21.9%. This may not be large enough to warrant any significant purchases, therefore the underlying driver may be the insiders’ belief of company growth prospects or simply their personal portfolio rebalancing.
Next Steps:
Polypipe Group’s insider meaningful buying activity tells us the shares are currently in favour, which is coherent with the positive growth in expected earnings, although the share price has not moved significantly to warrant reassessment of mispricing. Although insider buying can be a useful prompt, following the lead of an insider, however, will never replace diligent research. I’ve compiled two essential aspects you should further examine:
Financial Health: Does Polypipe Group 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 Polypipe Group? 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.
