TTM Technologies, Inc., together with its subsidiaries, manufactures printed circuit boards (PCBs) worldwide. TTM Technologies is one of United States’s large-cap stocks that saw some insider selling over the past three months, with insiders divesting from 26.46k shares during this period. Generally, insiders selling shares in their own firm sends a bearish signal. The MIT Press (1998) published an article showing that stocks following insider selling underperformed the market by 2.7%. 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 reduce their investment of late.
Who Are Selling Their Shares?
More shares have been sold than bought by TTM Technologies’s insiders in the past three months. In total, individual insiders own less than one million shares in the business, or around 0.64% of total shares outstanding. Insiders that have recently sold some of their shares include Tai Chung (management) and William Hardwick (management) .
Is Future Growth Outlook As Bearish?
At first glance, analysts’ earnings expectations of -23.86% over the next three years illustrates poor outlook for the company, consistent with the signal company insiders are sending with their net selling activity. Probing further into annual growth rates, TTM Technologies is expected to experience a restrained level of top-line growth over the next year, which contributes to the highly negative expected earnings growth. This illustrates that cost growth has excessively exceeded that of the top-line, leading to an unsustainable decline in earnings. Selling activities by insiders seem to be consistent with this pessimistic future prospect. Or they may simply deem the current share price is well-above its intrinsic value, providing an opportune time to sell.
Did Stock Price Volatility Instigate Selling?
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. TTM Technologies’s shares ranged between $19.47 and $15.85 over the past three months. This suggests some volatility with a share price change of of 22.84%. 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 needs.
TTM Technologies’s net selling activity tells us the stock has fallen out of favour with some insiders as of late, coherent with the poor growth in expected earnings, although the share price has not moved significantly to warrant reassessment of mispricing. But we must also be aware that insiders divesting may not actually be based their views on the company’s outlook. 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 relevant factors you should look at:
- Financial Health: Does TTM Technologies 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 TTM Technologies? 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.