Yahoo Finance Who Just Ramped Up Their Shares In Augean plc (LON:AUG)?
Augean plc engages in the waste management businesses in the United Kingdom. Augean’s insiders have invested more than 6 million shares in the small-cap stocks 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. I’ve assessed two potential reasons behind the insiders’ latest motivation to buy more shares.
Check out our latest analysis for Augean
Which Insiders Are Buying?
More shares have been bought than sold by Augean insiders in the past three months. In total, individual insiders own over 7 million shares in the business, which makes up around 6.39% of total shares outstanding. The following insiders have recently increased their company holdings: James Meredith (management and board member) and Roger McDowell (board member) .
The entity that bought on the open market in the last three months was
Harwood Capital LLP. Although this is an institutional investor, rather than a company executive or board member, the insights gained from direct access to management as a large investor would make it more well-informed than the average retail investor. In this specific instance, I would classify this investor as a company insider.
Does Buying Activity Reflect Future Growth?
At first glance, analysts’ revenue growth expectations of -4.03% over the next three years illustrates negative outlook for the business, however, this is contrary to the signal company insiders are sending with their net buying activity. Digging deeper into the line items,analysts anticipate negative growth in its top-line over the next year, which indicates the company may be facing some headwinds. Insider buying activities show that they have conviction in the company’s capacity to keep growing. They may see it in the midst of a turnaround or simply deem the stock undervalued, with negative sentiment over-discounting the share price.
Did Insiders Buy On Share Price Volatility?
Alternatively, the timing of these insider transactions may have been driven by share price volatility. 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, Augean’s share price reached a high of £0.38 and a low of £0.25. This suggests a relatively high volatility with large change of 52%. This movement could potentially be significant enough to warrant insiders to accrue their shares.
Next Steps:
Augean’s insider meaningful buying activity tells us the shares are currently in favour, which is coherent with the positive growth in expected earnings, on top of a reasonable share price movement around the same time. Although insider buying can be a useful prompt, following the lead of an insider, however, will never replace diligent research. I’ve compiled two relevant factors you should look at:
Financial Health: Does Augean 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 Augean? 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.
