Should You Be Worried When Fresh Del Monte Produce Inc’s (NYSE:FDP) Insiders Sell?
Fresh Del Monte Produce Inc., through its subsidiaries, produces, markets, and distributes fresh and fresh-cut fruits and vegetables worldwide. Fresh Del Monte Produce’s insiders have divested from 76.22k shares in the large-cap stock within the past three months. 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%. But these signals may not be sufficient to gain confidence on whether to divest. Today we will evaluate whether these decisions are bolstered by analysts’ expectations of future growth as well as recent share price movements.
Check out our latest analysis for Fresh Del Monte Produce
Who Are Selling Their Shares?
More shares have been sold than bought by Fresh Del Monte Produce’s insiders in the past three months. In total, individual insiders own over 18.51 million shares in the business, which makes up around 37.94% of total shares outstanding. The following insiders have recently reduced their company holdings: Emanuel Lazopoulos (management) , Helmuth Lutty (management) , Marissa Tenazas (management) , Marlene Gordon (management) , Mohammed Abu Ghazaleh (management) , Paul Rice , Richard Contreras (management) , Sergio Mancilla (management) and Youssef Zakharia (management and board member) .
Is This Consistent With Future Growth?
Analysts’ expectations for earnings over the next 3 years of 354% provides a very optimistic outlook for the business. However, this is inconsistent with the signal company insiders are sending with their net selling activity. Probing further into annual growth rates, analysts anticipate a rather subdued top-line growth over the next year, but a significantly higher expected earnings growth. Generally, this difference can be explained by a large drop in cost growth. However, this exercise may not be viable over the long run which may prompt insiders to reconsider their shareholdings. Or else they may view the market has overvalued the stock, presenting a favourable environment to sell.
Can Share Price Volatility Explain The Sell?
An alternative reason for recent trades could be insiders taking advantage of the share price volatility. This means, if insiders believe shares were heavily undervalued recently, this would provide a prime opportunity to buy more irrespective of its growth outlook. In the past three months, Fresh Del Monte Produce’s share price reached a high of $46.01 and a low of $36.3. This suggests moderate volatility with a share price movement of 26.75%. This may not be large enough to warrant any significant divesting, therefore the underlying driver may be the insiders’ belief of company growth prospects or simply their personal portfolio diversification needs.
Next Steps:
Fresh Del Monte Produce’s insiders’ meaningful divestments tells us that their shares have recently fallen out of favour, though the positive growth in expected earnings tells us a different story, and the relatively stable stock price may not warrant exploiting any mispricing. However it’s crucial to note that insider divesting may have nothing to do with their views on the company’s future performance. Furthermore, while insider transactions could be a helpful signal, it is definitely not sufficient on its own to make an investment decision. there are two fundamental factors you should further examine:
Financial Health: Does Fresh Del Monte Produce 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 Fresh Del Monte Produce? 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 editorial-team@simplywallst.com.
