Yahoo Finance Did An Insider Sell Their Shares In BJ’s Restaurants Inc (NASDAQ:BJRI)?
BJ’s Restaurants, Inc. owns and operates casual dining restaurants in the United States. BJ’s Restaurants’s insiders have divested from 92.41k shares in the large-cap stock within the past three months. It is widely considered that insider selling stock in their own companies is potentially 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. I will be analysing whether these selling activities are supported by favourable future outlook and recent share price volatility.
View our latest analysis for BJ’s Restaurants
Who Are The Insiders?
There were more BJ’s Restaurants insiders that have sold shares than those that have bought. In total, individual insiders own less than one million shares in the business, or around 1.4% of total shares outstanding. The following insiders have recently reduced their company holdings: Alexander Puchner (management) , Brian Krakower (management) , Gerald Deitchle (board member) , Kevin Mayer (management) , Larry Bouts (board member) , Lea Anne Ottinger (management) , Lon Ledwith (board member) , Noah Elbogen (board member) and Patrick Walsh (board member) . The entity that sold on the open market in the last three months was PW Partners Capital Management LLC. 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.
Does Selling Activity Reflect Future Growth?
Analysts’ expectations for earnings over the next 3 years of 12.5% provides a satisfactory outlook for the company. However this is inconsistent with the signal company insiders are sending with their net selling activity. Delving deeper into the line items, BJ’s Restaurants is expected to experience a restrained level of top-line growth over the next year, which is expected to negatively impact the bottom line, with a growth rate of -17.4%. This illustrates that cost growth has exceeded top-line, leading to an unsustainable decline in earnings. Insiders’ net selling activity seems to bolster this negative sentiment. Otherwise, they may simply view the current share price is well-above the intrinsic value, providing a prime time to sell.
Can Share Price Volatility Explain The Sell?
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, BJ’s Restaurants’s share price reached a high of $74.7 and a low of $52. This suggests a relatively high volatility with large change of 43.65%. This movement is potentially meaningful enough to trade on if insiders believe the market has mispriced their companies’ shares. Or perhaps their reason to sell is not driven by price or growth prospects and merely by the need to diversify their own portfolio holdings.
Next Steps:
BJ’s Restaurants’s net selling activity tells us the stock has fallen out of favour with some insiders as of late, which is consistent with the significant expected earnings growth, on top of a reasonable share price movement around the same time. However, it’s important to keep in mind, insider selling may not necessarily be based on their belief of the company’s ability to perform in the future. 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 aspects you should further examine:
Financial Health: Does BJ’s Restaurants 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 BJ’s Restaurants? 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.
