What Do Transurban Group (ASX:TCL) Insiders Know That You Don’t?
Transurban Group develops, operates, maintains, and finances urban toll road networks. Transurban Group is one of Australia’s large-cap stocks that saw some insider buying over the past three months, with insiders investing in more than 23 million 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, these signals may not be enough to gain conviction on whether to invest. Today we will evaluate whether these decisions are bolstered by analysts’ expectations of future growth as well as recent share price movements.
View our latest analysis for Transurban Group
Which Insiders Are Buying?
More shares have been bought than sold by Transurban Group insiders in the past three months. In total, individual insiders own over 2 million shares in the business, which makes up around 0.09% of total shares outstanding. The insider that recently bought more shares is Rodney Slater (board member) .
The entity that bought on the open market in the last three months was
BlackRock Inc.. 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.
Does Buying Activity Reflect Future Growth?
At first glance, analysts’ earnings expectations of 32.20% over the next three years illustrates 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,Transurban Group is believed to experience negative growth in its top-line over the next year, which indicates the company may be facing some headwinds. Although, next year’s bottom line growth is expected to positive at 8.96% which could indicate a relatively effective cost management in order to bring the company back to positive earnings. Insiders increasing their holding could show they have confidence in the company’s ability to continue growing. They may believe it is nearing the end of a turnaround or merely feel the market has discounted the stock too heavily, providing a prime opportunity to buy.
Can Share Price Volatility Explain The Buy?
Another factor we should consider is whether the timing of these insider transactions coincide with any significant share price movements. Volatility provides an opportunity to trade on market inefficiencies when the stock is under-priced compared to the stock’s intrinsic value. Transurban Group’s shares ranged between A$12.36 and A$11.05 over the past three months. This indicates a trivial share price movement, with a change of 11.86%. This may mean insiders’ motivation to trade may not be driven by the share price but rather other factors such as their belief in company growth or their personal portfolio rebalancing.
Next Steps:
Transurban Group’s insider meaningful buying activity tells us the shares are currently in favour, which is coherent with the positive growth in expected earnings, 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 put together two relevant factors you should further examine:
Financial Health: Does Transurban 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 Transurban 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.
