New Age Beverages Corporation, a healthy functional beverage company, engages in the development, marketing, sales, and distribution of beverages. New Age Beverages is one of United States’s small-cap stocks that saw some insider buying over the past three months, with insiders investing in more than 1.51 million shares during this period. It is widely considered that insider buying stock in their own companies is potentially a bullish signal. The MIT Press (1998) published an article showing that stocks following insider buying outperformed the market by 4.5%. But these signals may not be sufficient to gain confidence 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?
There were more New Age Beverages insiders that have bought shares than those that have sold. In total, individual insiders own over 9.8 million shares in the business, which makes up around 19.84% of total shares outstanding.
Insiders that have recently ramped up their holdings are: This statement is created if only one individual insider bought company shares in past 3 months .
Is Future Growth Outlook As Bullish?
On the surface, analysts’ earnings growth projection of 91.0% over the next three years provides a very buoyant outlook for the business which is consistent with the signal company insiders are sending with their net buying activity.
Delving deeper into the line items, New Age Beverages is expected to experience a healthy double-digit top-line growth next year, which is expected to drive significant 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.
Insiders recognising these benefits as defensible may accumulate their shares in the company. Another reason could simply be they deem the shares under-priced given the growth potential the business could produce.
Did Stock Price Volatility Instigate Buying?
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.
In the past three months, New Age Beverages’s share price reached a high of $4.37 and a low of $1.32. This indicates meaningful movements in the share price with a change of 231.06%.
This movement is meaningful enough to trade on if insiders believe the market has mispriced their companies’ shares.
New Age Beverages’s insider meaningful buying activity tells us the shares are currently in favour, which is consistent with the significant expected earnings growth, in addition to the large share price movement around the same time. Although insider buying can be a useful prompt, following the lead of an insider, however, will never replace diligent research. I’ve compiled two key factors you should further examine:
- Financial Health: Does New Age Beverages 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 New Age Beverages? 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.