Yahoo Finance Bullish Metlifecare Limited (NZE:MET) Insiders Ramp Up Investment In Stock
Metlifecare Limited develops, owns, and operates retirement villages primarily in North Island of New Zealand. Metlifecare’s insiders have invested more than 2 million shares in the within the past three months. 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 will be analysing whether these buying activities are supported by favourable future outlook and recent share price volatility.
See our latest analysis for Metlifecare
Who Are The Insiders?
Over the past three months, more shares have been bought than sold by Metlifecare’s’ insiders. In total, individual insiders own over 1 million shares in the business, which makes up around 0.68% of total shares outstanding. The insider that recently bought more shares is Alistair Ryan (board member) .
The entity that bought on the open market in the last three months was
Devon Funds Management Limited. Although this is an institutional investor, rather than a company executive or board member, the insights gained from direct access to management as a large investor would make it more well-informed than the average retail investor. In this specific instance, I would classify this investor as a company insider.
Is Future Growth Outlook As Bullish?
Analysts’ expectations for earnings over the next 3 years of 35.24% provides an upbeat outlook going forward which is consistent with the signal company insiders are sending with their net buying activity. Delving deeper into the line items,analysts anticipate a double-digit top-line growth over the next year, which seems to a certain degree, fall to the bottom line growth of {(analysis.data.extended.data.analysis.future.net_income_growth_1y)|percentage}}. Continued revenue growth combined with cost-efficiency initiatives could lead to even higher earnings growth going forward. If insiders anticipate an improvement in earnings, they may ramp up their shares now before the market has incorporate the full growth potential into the share price.
Did Insiders Buy On Share Price Volatility?
Alternatively, the timing of these insider transactions may have been driven by 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. Within the past three months, Metlifecare’s share price traded at a high of NZ$6.28 and a low of NZ$5.56. This suggests an immaterial change in share price, with a movement of 12.95%. This may mean insiders’ motivation to trade may not be driven by the share price but rather other factors such as their belief in company growth or their personal portfolio rebalancing.
Next Steps:
Metlifecare’s insider meaningful buying activity tells us the shares are currently in favour, which is relatively consistent with expected earnings growth, although the share price has not moved significantly to warrant reassessment of mispricing. However, 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 aspects you should further research:
Financial Health: Does Metlifecare 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 Metlifecare? 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 pass 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.
