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Bullish Flybe Group PLC (LON:FLYB) Insiders Ramp Up Investment In Stock

Flybe Group plc engages in the operation of airlines. Flybe Group is one of United Kingdom’s small-cap stocks that saw some insider buying over the past three months, with insiders investing in more than 3 million shares during this period. A well-known argument is that insiders investing more in their own companies’ shares sends an optimistic 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.

View our latest analysis for Flybe Group

Who Are The Insiders?

LSE:FLYB Insider_trading May 18th 18
LSE:FLYB Insider_trading May 18th 18

More shares have been bought than sold by Flybe Group insiders in the past three months. In total, individual insiders own over 1 million shares in the business, which makes up around 0.5% of total shares outstanding. .

The entity that bought on the open market in the last three months was

Barclays Bank PLC Securities Investments Hosking Partners LLP Uliel Dreyfuss Nathan Capital Investment Management LTD. 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?

LSE:FLYB Future Profit May 18th 18
LSE:FLYB Future Profit May 18th 18

At a very high level, Flybe Group’s future looks mediocre. Delving deeper into the line items,Flybe Group is expected to experience a limited level of revenue growth next year, but a significantly higher expected earnings growth. Generally, this difference can be explained by a large drop in cost growth. 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?

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. Within the past three months, Flybe Group’s share price traded at a high of £0.48 and a low of £0.33. This suggests a relatively high volatility with large change of 45.33%. This movement could potentially be significant enough to warrant insiders to accrue their shares.

Next Steps:

Flybe Group’s net buying tells us the stock is in favour with some insiders, reinforced by the substantial earnings growth expectations, and a fairly high volatility in share price over the same time period. However, while insider transactions could be a helpful signal, it is definitely not sufficient on its own to make an investment decision. I’ve put together two essential factors you should look at:

  1. Financial Health: Does Flybe 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.

  2. Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of Flybe 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.

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