What Do Black Diamond Group Limited (TSE:BDI) Insiders Know That You Don’t?
Black Diamond Group Limited rents and sells workspace and modular workforce accommodation solutions. Black Diamond Group is one of Canada’s small-cap stocks that saw some insider buying over the past three months, with insiders investing in 921.60k shares during this period. Generally, insiders buying more shares in their own firm sends 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. See our latest analysis for Black Diamond Group
Who Are Ramping Up Their Shares?
Over the past three months, more shares have been bought than sold by Black Diamond Group’s’ insiders. In total, individual insiders own over 9.56 million shares in the business, which makes up around 17.24% of total shares outstanding.
Is Future Growth Outlook As Bullish?
On the surface, analysts’ earnings growth projection of 97.85% over the next three years provides a very optimistic outlook for the business which is consistent with the signal company insiders are sending with their net buying activity. Digging deeper into the line items, Black Diamond Group is expected to experience a rather subdued top-line growth over the next year, but a significantly higher expected earnings growth. This could indicate large cost-cutting initiatives by the company to boost its 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.
Can Share Price Volatility Explain The Buy?
Alternatively, the timing of these insider transactions may have been driven by share price volatility. A correlation could mean directors are trading on market inefficiencies based on their belief of the company’s intrinsic value. In the past three months, Black Diamond Group’s share price reached a high of CA$3.59 and a low of CA$2.28. This suggests a relatively high volatility with large change of 57.46%. Insiders may deem this relatively meaningful movement as an opportunity to increase their shareholdings.
Next Steps:
Black Diamond Group’s net buying tells us the stock is in favour with some insiders, which is consistent with the significant expected earnings growth, as well as the relatively large share price volatility over the same period of trade. Although insider buying can be a useful prompt, following the lead of an insider, however, will never replace diligent research. there are two relevant factors you should look at:
Financial Health: Does Black Diamond 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 Black Diamond 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.
