Are Insiders Too Confident In REV Group Inc (NYSE:REVG)?
REV Group, Inc. designs, manufactures, and distributes specialty vehicles in the United States, Canada, Europe, Africa, the Middle East, and internationally. REV Group is one of United States’s some insider buying over the past three months, with insiders investing in 101,000 shares during this period. It is widely considered that insider buying stock in their own companies is potentially a bullish signal. A two-decade research published in The MIT Press (1998) showed 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. I’ve assessed two potential reasons behind the insiders’ latest motivation to buy more shares.
See our latest analysis for REV Group
Which Insiders Are Buying?
There were more REV Group insiders that have bought shares than those that have sold. In total, individual insiders own less than one million shares in the business, or around 1.37% of total shares outstanding. Latest buying activities involved the following insiders: Barbara Stephens (management) and Timothy Sullivan (management and board member) .
Is Future Growth Outlook As Bullish?
At first glance, analysts’ earnings expectations of 146.16% over the next three years illustrates an exceptional outlook for the business which is consistent with the signal company insiders are sending with their net buying activity. Probing further into annual growth rates,REV Group is believed to experience a healthy double-digit top-line growth next year, which is expected to drive significant expected earnings growth as well. This may mean the company is reaping meaningful benefits from past growth initiatives, placing it in a beneficial position for future profits. Insiders’ conviction in this strong performance is illustrated by their ramp up in shareholdings. Or they may merely believe the stock is undervalued by the market relative to the growth potential it will deliver.
Can Share Price Volatility Explain The Buy?
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, REV Group’s share price traded at a high of $31.39 and a low of $18.42. This suggests a significant level of volatility in share price with a change of 70.41%. This movement is meaningful enough to trade on if insiders believe the market has mispriced their companies’ shares.
Next Steps:
REV Group’s insider meaningful buying activity tells us the shares are currently in favour, coherent with the sizeable growth in expected earnings, as well as the significant 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 key factors you should further examine:
Financial Health: Does REV Group 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 REV Group? 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.
