Fluidigm Corporation creates, manufactures, and markets technologies and tools for life sciences research in the United States and Europe. Fluidigm is one of United States’s small-cap stocks that saw some insider buying over the past three months, with insiders investing in 304,313 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 analysed two possible reasons driving the insiders’ decision to ramp up their investment of late.
Who Are Ramping Up Their Shares?
Over the past three months, more shares have been bought than sold by Fluidigm’s’ insiders. In total, individual insiders own less than one million shares in the business, or around 1.19% of total shares outstanding. .
The entity that bought on the open market in the last three months was
Levin Capital Strategies L.P.. 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?
Analysts’ expectations for earnings over the next 3 years of 35.68% provides a strong outlook going forward which is consistent with the signal company insiders are sending with their net buying activity. Delving deeper into the line items,Fluidigm is expected to experience a healthy double-digit top-line growth next year, which seems to flow through somewhat to its earnings growth of 1.76%. Continued revenue growth combined with cost-efficiency initiatives could lead to even higher earnings growth going forward. If insiders anticipate an improvement in earnings, they may ramp up their shares now before the market has incorporate the full growth potential into the share price.
Did Insiders Buy On Share Price Volatility?
Alternatively, the timing of these insider transactions may have been driven by share price volatility. Volatility provides an opportunity to trade on market inefficiencies when the stock is under-priced compared to the stock’s intrinsic value. Within the past three months, Fluidigm’s share price traded at a high of $6.9 and a low of $5.46. This indicates some volatility with a share price change of of 26.37%. This may not be large enough to warrant any significant purchases, therefore the underlying driver may be the insiders’ belief of company growth prospects or simply their personal portfolio rebalancing.
Fluidigm’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. However, 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 essential aspects you should further research:
- Financial Health: Does Fluidigm 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 Fluidigm? 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.