Live Oak Bancshares, Inc. operates as the bank holding company for the Live Oak Banking Company that provides various commercial banking products and services to individuals and businesses in North Carolina. Live Oak Bancshares’s insiders have invested 135.50k shares in the large-cap stocks within the past three months. Generally, insiders buying more shares in their own firm sends a bullish signal. The MIT Press (1998) published an article showing 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 analysed two possible reasons driving the insiders’ decision to ramp up their investment of late.
Who Are Ramping Up Their Shares?
More shares have been bought than sold by Live Oak Bancshares insiders in the past three months. In total, individual insiders own over 10.21 million shares in the business, which makes up around 25.44% of total shares outstanding. Insiders that have recently bought more shares are: James Mahan (management and board member) , Susan Janson (management and board member) and William Williams This statement is created if only one individual insider bought company shares in past 3 months .
Is This Consistent With Future Growth?
At first sight, Live Oak Bancshares’s future looks bright. Probing further into annual growth rates, Live Oak Bancshares is believed to experience an impressive double-digit top-line growth next year, which has not been passed down into earnings expectations given its large negative growth. This indicates high levels of cost growth compared to revenues, which is typical during a period of investment and growth in the company. This appears to be bolstered by directors’ confidence due to the net buying activities. Or they may simply view the share price is currently too low compared to the share’s intrinsic value.
Did Insiders Buy On Share Price Volatility?
Alternatively, the timing of these insider transactions may have been driven by 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. Live Oak Bancshares’s shares ranged between $32.45 and $28.25 over the past three months. This suggests an immaterial change in share price, with a movement of 14.87%. Perhaps not a significant enough movement to warrant transactions, thus motivation may be a result of their belief in the company in the future or simply personal portfolio rebalancing.
Live Oak Bancshares’s net buying tells us the stock is in favour with some insiders, though negative growth in expected earnings contests this assumption, and the share price has not moved significantly to warrant reassessment of mispricing. 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 Live Oak Bancshares 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 Live Oak Bancshares? 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.