How Confident Are Insiders About Build-A-Bear Workshop Inc (NYSE:BBW)?
Build-A-Bear Workshop, Inc. operates as a specialty retailer of plush animals and related products. Build-A-Bear Workshop is one of United States’s small-cap stocks that saw some insider buying over the past three months, with insiders investing in 254,671 shares during this period. Generally, insiders buying more shares in their own firm sends a bullish signal. The MIT Press (1998) published an article showing 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 will be analysing whether these buying activities are supported by favourable future outlook and recent share price volatility.
Check out our latest analysis for Build-A-Bear Workshop
Who Are Ramping Up Their Shares?
Over the past three months, more shares have been bought than sold by Build-A-Bear Workshop’s’ insiders. In total, individual insiders own less than one million shares in the business, or around 5.75% of total shares outstanding. .
The entity that bought on the open market in the last three months was
Cannell Capital 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 This Consistent With Future Growth?
On the surface, Build-A-Bear Workshop’s future looks muted. Probing further into annual growth rates,Build-A-Bear Workshop is expected to experience a rather subdued top-line growth over the next year, Insiders that believe the company could continue to deliver growth may have the incentive to increase their holdings.
Did Insiders Buy 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, Build-A-Bear Workshop’s share price reached a high of $10.1 and a low of $7.8. This suggests some volatility with a share price change of of 29.49%. Insiders’ purchases may not be driven by this movement but perhaps their view of the company’s growth in the future or simply their individual portfolio rebalancing.
Next Steps:
Build-A-Bear Workshop’s net buying tells us the stock is in favour with some insiders, which is relatively consistent with expected earnings growth, although the share price has not moved significantly to warrant reassessment of mispricing. Although insider buying can be a useful prompt, following the lead of an insider, however, will never replace diligent research. I’ve put together two key aspects you should look at:
Financial Health: Does Build-A-Bear Workshop 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 Build-A-Bear Workshop? 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.
