People’s Utah Bancorp operates as the bank holding company for People’s Intermountain Bank that provides retail and commercial banking products and services. People’s Utah Bancorp is one of United States’s small-cap stocks that saw some insider selling over the past three months, with insiders divesting from 14.00k shares during this period. A well-known argument is that insiders divesting from their own companies’ shares sends a pessimistic signal. The MIT Press (1998) published an article showing that stocks following insider selling underperformed the market by 2.7%. But these signals may not be sufficient to gain confidence on whether to divest. I’ve assessed two potential reasons behind the insiders’ latest motivation to sell their shares.
Which Insiders Are Selling?
More shares have been sold than bought by People’s Utah Bancorp’s insiders in the past three months. In total, individual insiders own over 2.18 million shares in the business, which makes up around 11.65% of total shares outstanding. Insiders that have recently trimmed down their holdings are Fred Fairclough and Robert Anderson (board member) .
Is Future Growth Outlook As Bearish?
At first sight, People’s Utah Bancorp’s future looks mediocre. Probing further into annual growth rates, analysts anticipate a restrained level of 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. However, insiders may recognise this is not a sustainable practice and this negative sentiment is evidenced by their net selling activity. Or they may simply view the current share price is well-above the intrinsic value, providing a prime time to sell.
Did Stock Price Volatility Instigate Selling?
Alternatively, the timing of these insider transactions may have been driven by share price volatility. A correlation could mean directors are trading on market inefficiencies based on their belief of the company’s intrinsic value. In the past three months, People’s Utah Bancorp’s share price reached a high of $38.4 and a low of $32. This indicates moderate volatility with a share price movement of 20%. This may not be large enough to warrant any significant divesting, therefore the underlying driver may be the insiders’ belief of company growth prospects or simply their personal portfolio diversification needs.
People’s Utah Bancorp’s net selling activity tells us the stock has fallen out of favour with some insiders as of late, however, this is rather cautious relative to analysts’ earnings expectation, and the relatively stable stock price may not warrant exploiting 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. Furthermore, while insider transactions could be a helpful signal, it is definitely not sufficient on its own to make an investment decision. I’ve put together two important factors you should look at:
- Financial Health: Does People’s Utah Bancorp 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 People’s Utah Bancorp? 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 firstname.lastname@example.org.