OPKO Health, Inc., a healthcare company, engages in the diagnostics and pharmaceuticals business in the United States, Ireland, Chile, Spain, Israel, Mexico, and internationally. OPKO Health’s insiders have invested 444.52k shares in the large-cap stocks within the past three months. Generally, insiders buying more shares in their own firm sends 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, these signals may not be enough to gain conviction on whether to invest. I’ve analysed two possible reasons driving the insiders’ decision to ramp up their investment of late.
Who Are The Insiders?
More shares have been bought than sold by OPKO Health insiders in the past three months. In total, individual insiders own over 45.04 million shares in the business, which makes up around 8.05% of total shares outstanding.
The following insiders have recently increased their company holdings: This statement is created if only one individual insider bought company shares in past 3 months .
Does Buying Activity Reflect Future Growth?
Analysts’ expectations for earnings over the next 3 years of 92.8% provides a fantastic outlook for the business which is consistent with the signal company insiders are sending with their net buying activity.
Digging deeper into the line items, OPKO Health is expected to experience a rather subdued top-line growth over the next year, but a suggestively greater level of expected earnings growth. Generally, this difference can be explained by a large drop in cost growth.
Net buying could signal high insider confidence, perhaps due to their belief of sustainable growth. Or they may simply see the current stock price is undervalued relative to intrinsic value.
Can Share Price Volatility Explain The Buy?
An alternative reason for recent trades could be insiders taking advantage of the 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.
OPKO Health’s shares ranged between $6.29 and $4.05 over the past three months. This indicates a relatively high volatility with large change of 55.31%.
This movement is meaningful enough to trade on if insiders believe the market has mispriced their companies’ shares.
OPKO Health’s net buying tells us the stock is in favour with some insiders, reinforced by the substantial earnings growth expectations, as well as the relatively large share price volatility over the same period of trade. However, while insider transactions could be a helpful signal, it is definitely not sufficient on its own to make an investment decision. there are two fundamental factors you should further examine:
- Financial Health: Does OPKO Health 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 OPKO Health? 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.