Bullish Tesla Inc (NASDAQ:TSLA) Insiders Ramp Up Investment In Stock
Tesla, Inc. designs, develops, manufactures, and sells electric vehicles, and energy generation and storage systems in the United States, China, Norway, and internationally. Tesla is one of United States’s large-cap stocks that saw some insider buying over the past three months, with insiders investing in 105,500 shares during this period. A well-known argument is that insiders investing more in their own companies’ shares sends an optimistic signal. The MIT Press (1998) published an article showing that stocks following insider buying outperformed the market by 4.5%. However, it may not be sufficient to base your investment decision merely on these signals. Today we will evaluate whether these decisions are bolstered by analysts’ expectations of future growth as well as recent share price movements.
View our latest analysis for Tesla
Who Are The Insiders?
There were more Tesla insiders that have bought shares than those that have sold. In total, individual insiders own over 35 million shares in the business, which makes up around 20.46% of total shares outstanding. The insider that recently bought more shares is Elon Musk (management and board member) .
Is This Consistent With Future Growth?
At first glance, analysts’ revenue growth expectations of 185.31% over the next three years illustrates a very buoyant 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,analysts anticipate a large double-digit top-line growth over the next year, which seems to drive high expected earnings growth as well. This may mean the company is reaping benefits from past growth initiatives, placing it in a beneficial position for future profits. Insiders’ conviction in this strong performance is signalled by their net buying activity. Or perhaps they merely see the stock undervalued by the market relative to the growth potential it will deliver.
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. A correlation could mean directors are trading on market inefficiencies based on their belief of the company’s intrinsic value. Tesla’s shares ranged between $357.72 and $252.48 over the past three months. This suggests a fairly large volatility with a share price movement of 41.68%. Insiders may deem this relatively meaningful movement as an opportunity to increase their shareholdings.
Next Steps:
Tesla’s insider meaningful buying activity tells us the shares are currently in favour, reinforced by the substantial earnings growth expectations, 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 important aspects you should look at:
Financial Health: Does Tesla 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 Tesla? 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.
