A10 Networks Inc’s (NYSE:ATEN) Insiders Recently Ramped Up Their Holdings – Should You?
A10 Networks, Inc. provides software and hardware solutions in the United States, Japan, and internationally. A10 Networks’s insiders have invested more than 3 million 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, these signals may not be enough to gain conviction on whether to invest. I’ve assessed two potential reasons behind the insiders’ latest motivation to buy more shares.
See our latest analysis for A10 Networks
Who Are Ramping Up Their Shares?
Over the past three months, more shares have been bought than sold by A10 Networks’s’ insiders. In total, individual insiders own over 10 million shares in the business, which makes up around 14.79% of total shares outstanding. .
The entity that bought on the open market in the last three months was
Viex Capital Advisors LLC. 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.
Is Future Growth Outlook As Bullish?
At a very high level, there are dark clouds on the horizon for A10 Networks. Delving deeper into the line items,A10 Networks is believed to experience negative growth in its top-line over the next year, which indicates the company may be facing some headwinds. Though, next year’s expected earnings will deliver a sizeable growth which may mean the company’s cost-cutting initiative will be meaningful enough to more than offset negative revenue growth. 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?
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, A10 Networks’s share price reached a high of $8.14 and a low of $5.77. This suggests a relatively high volatility with large change of 41.07%. This movement could potentially be significant enough to warrant insiders to accrue their shares.
Next Steps:
A10 Networks’s net buying tells us the stock is in favour with some insiders, coherent with the sizeable growth in expected earnings, and a fairly high volatility in share price over the same time period. Although insider buying can be a useful prompt, following the lead of an insider, however, will never replace diligent research. there are two fundamental aspects you should further examine:
1. Financial Health: Does A10 Networks 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.
2. Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of A10 Networks? 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.
