How Confident Are Insiders About Wincanton plc (LON:WIN)?
Wincanton plc, together with its subsidiaries, provides logistic and supply chain solutions in the United Kingdom and Ireland. Wincanton is one of United Kingdom’s small-cap stocks that saw some insider selling over the past three months, with insiders divesting from 120.31k shares during this period. Generally, insiders selling shares in their own firm sends a bearish signal. The MIT Press (1998) published an article showing that stocks following insider selling underperformed the market by 2.7%. However, it may not be sufficient to base your investment decision merely on these signals. I will be analysing whether these selling activities are supported by favourable future outlook and recent share price volatility.
View our latest analysis for Wincanton
Who Are Selling Their Shares?
Over the past three months, more shares have been sold than bought by Wincanton’s insiders. In total, individual insiders own over 1.25 million shares in the business, which makes up around 1.01% of total shares outstanding.
The insider that recently sold more shares is Liam McElroy (management) .
Does Selling Activity Reflect Future Growth?
Analysts’ expectations for earnings over the next 3 years of 34.5% provides an upbeat outlook going forward. But this is not consistent with the signal company insiders are sending with their net selling activity.
Digging deeper into the line items, Wincanton is expected to experience a rather subdued top-line growth over the next year, however, earnings growth is expected to be strong at 26.0%. This may mean the company’s cost-cutting initiative will be significant enough to boost earnings.
This may not be seen as a maintainable practice by insiders, who may expect a decline in earnings to reflect lower revenues in the future. Or they may merely view the stock as overvalued by the market which provides a suitable time to sell.
Did Stock Price Volatility Instigate Selling?
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.
Wincanton’s shares ranged between £2.8 and £2.2 over the past three months. This suggests reasonable volatility with a change of 27.27%.
Perhaps not a significant enough movement to warrant transactions, thus motivation may be a result of their belief in the company in the future or simply personal needs.
Next Steps:
Wincanton’s insiders’ meaningful divestments tells us that their shares have recently fallen out of favour, however, this is rather cautious relative to analysts’ earnings expectation, and the share price movement may be too trivial to cash in on 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. Furthermore, while insider transactions could be a helpful signal, it is definitely not sufficient on its own to make an investment decision. I’ve compiled two key factors you should further examine:
Financial Health: Does Wincanton 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 Wincanton? 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.
