Vaccinex, Inc. operates as a clinical-stage biotechnology company. Vaccinex’s insiders have invested more than 2.46 million shares in the small-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, 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.
Who Are Ramping Up Their Shares?
More shares have been bought than sold by Vaccinex insiders in the past three months. In total, individual insiders own over 1.07 million shares in the business, which makes up around 9.3% of total shares outstanding.
. Entities that bought on the open market in the last three months were FCMI Parent Co. and Friedberg Mercantile Group Ltd., Asset Management Arm. Although these are institutional investors, rather than company executives or board members, the insights these investors gain from direct access to management as large investors would make them better-informed than the average retail investor. In this specific instance, I would classify these investors as company insiders.
Is Future Growth Outlook As Bullish?
On the surface, analysts’ earnings growth projection of 91.4% over the next three years provides a very optimistic 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, analysts anticipate negative growth in its top-line over the next year, which indicates the company may be facing some headwinds. This will likely flow through to its earnings next year, illustrated by a highly negative growth expectation, indicating cost-cutting may not be able to pull it through into a positive growth region yet.
Although, insiders seem to know something the market does not and have been ramping up their holdings in times of uncertainty. This indicates they may see a turnaround or deem the stock to be over-penalized by negative market sentiment.
Did Insiders Buy On Share Price Volatility?
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, Vaccinex’s share price reached a high of $13.5 and a low of $9.21. This suggests reasonably high share price volatility with a change of 46.58%.
This movement is meaningful enough to trade on if insiders believe the market has mispriced their companies’ shares.
Vaccinex’s net buying tells us the stock is in favour with some insiders, although the expected earnings growth challenges this conclusion, while a relatively volatile share price could be the motivation to trade. Although insider buying can be a useful prompt, following the lead of an insider, however, will never replace diligent research. I’ve compiled two fundamental factors you should look at:
- Financial Health: Does Vaccinex 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 Vaccinex? 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.