Columbia Banking System, Inc. operates as the bank holding company for Columbia State Bank that provides a range of banking services to small and medium-sized businesses, professionals, and individuals in Washington, Oregon, and Idaho. Columbia Banking System’s insiders have divested from 1.81k shares in the large-cap stock within the past three months. Generally, insiders selling shares in their own firm sends a bearish signal. A research published in The MIT Press (1998) concluded that stocks following insider selling fell 2.7% compared to the market. However, it may not be sufficient to base your investment decision merely on these signals. I’ve assessed two potential reasons behind the insiders’ latest motivation to sell their shares.
Which Insiders Are Selling?
There were more Columbia Banking System insiders that have sold shares than those that have bought. In total, individual insiders own less than one million shares in the business, or around 0.55% of total shares outstanding. The insider that recently sold more shares is David Lawson (management) .
Is This Consistent With Future Growth?
At first glance, analysts’ earnings expectations of 44.6% over the next three years illustrates 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, analysts anticipate a healthy double-digit top-line growth next year, which seems to drive higher expected earnings growth as well. This could indicate significant cost-cutting activities or a high degree of economies of scale which may have a compounding impact in the future. Insider net selling activity is counter to what we’d expect given a significantly positive earnings outlook, indicating they may know something the market does not. Insiders could perceive the high growth as unsustainable or that it has been excessively factored into the current share price.
Did Stock Price Volatility Instigate Selling?
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, Columbia Banking System’s share price traded at a high of $44.38 and a low of $40.48. This suggests an immaterial change in share price, with a movement of 9.63%. Potentially, insider transactions are not share price related but may be due to their belief on what will happen to the company in the future or simply just personal cash and diversification needs.
Columbia Banking System’s insiders’ meaningful divestments tells us that their shares have recently fallen out of favour, though the positive growth in expected earnings tells us a different story, and the share price movement may be too trivial to cash in on any mispricing. However it’s crucial to note that insider divesting may have nothing to do with their views on the company’s future performance. Moreover, while insider selling can be a useful prompt, following the lead of an insider, however, will never replace diligent research. I’ve put together two important factors you should further research:
- Financial Health: Does Columbia Banking System 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 Columbia Banking System? 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 email@example.com.