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Applied Industrial Technologies Inc’s (NYSE:AIT) Insiders Have Sold Shares – Should You?

Applied Industrial Technologies, Inc. distributes industrial products in North America, Australia, New Zealand, and Singapore. Applied Industrial Technologies is one of United States’s large-cap stocks that saw some insider selling over the past three months, with insiders divesting from 12.50k shares during this period. Generally, insiders selling shares in their own firm sends a bearish signal. A two-decade research published in The MIT Press (1998) showed that stocks following insider selling declined 2.7% relative to the market. However, these signals may not be enough to gain conviction on whether to divest. Today we will evaluate whether these decisions are bolstered by analysts’ expectations of future growth as well as recent share price movements.

See our latest analysis for Applied Industrial Technologies

Who Are The Insiders?

NYSE:AIT Insider Trading September 19th 18
NYSE:AIT Insider Trading September 19th 18

Over the past three months, more shares have been sold than bought by Applied Industrial Technologies’s insiders. In total, individual insiders own less than one million shares in the business, or around 1.49% of total shares outstanding.

The insider that recently sold more shares is L. Hiltz (board member) .

Is Future Growth Outlook As Bearish?

NYSE:AIT Future Profit September 19th 18
NYSE:AIT Future Profit September 19th 18

At first glance, Applied Industrial Technologies’s future looks positive.

Probing further into annual growth rates, analysts anticipate a healthy double-digit top-line growth next year, which seems to flow through to its expected earnings growth of 29.2%. High levels of sustained revenue growth as well as improved cost management could see higher levels of future earnings.

But this positive outlook is not supported by insiders’ selling activities which may mean they see things differently to the current optimistic situation. Insiders may feel the growth is unsustainable or the market has significantly overvalued the stock.

Did Insiders Sell On Share Price Volatility?

An alternative reason for recent trades could be insiders taking advantage of the share price volatility. This means, if insiders believe shares were heavily undervalued recently, this would provide a prime opportunity to buy more irrespective of its growth outlook.

In the past three months, Applied Industrial Technologies’s share price reached a high of $80.2 and a low of $70.05. This suggests a relatively insignificant share price movement, with a small change of 14.49%.

Potentially, insider transactions are not share price related but may be due to their belief on what will happen to the company in the future or simply just personal cash and diversification needs.

Next Steps:

Applied Industrial Technologies’s net selling activity tells us the stock has fallen out of favour with some insiders as of late, however, this is rather cautious relative to analysts’ earnings expectation, and the relatively stable stock price may not warrant exploiting any mispricing. However, it’s important to keep in mind, insider selling may not necessarily be based on their belief of the company’s ability to perform in the future. Moreover, while insider selling can be a useful prompt, following the lead of an insider, however, will never replace diligent research. there are two key factors you should further examine:

  1. Financial Health: Does Applied Industrial Technologies 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 Applied Industrial Technologies? 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

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