Yahoo Finance Who Just Ramped Up Their Shares In Wm Morrison Supermarkets PLC (LON:MRW)?
Wm Morrison Supermarkets PLC operates retail super stores under the Morrisons brand name in the United Kingdom. Wm Morrison Supermarkets is one of United Kingdom’s large-cap stocks that saw some insider buying over the past three months, with insiders investing in 100.00k shares during this period. Generally, insiders buying more shares in their own firm sends a bullish signal. A two-decade research published in The MIT Press (1998) showed that stocks following insider buying outperformed the market by 4.5%. However, these signals may not be enough to gain conviction on whether to invest. I’ve analysed two possible reasons driving the insiders’ decision to ramp up their investment of late. See our latest analysis for Wm Morrison Supermarkets
Who Are Ramping Up Their Shares?
Over the past three months, more shares have been bought than sold by Wm Morrison Supermarkets’s’ insiders. In total, individual insiders own over 72.44 million shares in the business, which makes up around 3.08% of total shares outstanding.
Is This Consistent With Future Growth?
At first glance, analysts’ earnings expectations of 12.06% over the next three years illustrates a good outlook for the company which is consistent with the signal company insiders are sending with their net buying activity. Probing further into annual growth rates, analysts anticipate a limited level of revenue growth next year, which appears to negatively affect earnings growth given the expected rate of -2.62%. This illustrates that cost growth has exceeded top-line, leading to an unsustainable decline in earnings. Although insiders may see prosperous times ahead given the current investment period, leading to their conviction to buy. Or else they may simply deem the stock to be undervalued by the negative sentiment.
Did Stock Price Volatility Instigate Buying?
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. Wm Morrison Supermarkets’s shares ranged between £2.57 and £2.04 over the past three months. This suggests some volatility with a share price change of of 25.87%. 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:
Wm Morrison Supermarkets’s insider meaningful buying activity tells us the shares are currently in favour, although the expected earnings growth challenges this conclusion, and the share price movement may be too trivial to cash in on any mispricing. Although insider buying can be a useful prompt, following the lead of an insider, however, will never replace diligent research. I’ve put together two essential factors you should further research:
Financial Health: Does Wm Morrison Supermarkets 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 Wm Morrison Supermarkets? 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.
