Yahoo Finance Korn/Ferry International’s (NYSE:KFY) Insiders Have Sold Shares – Should You?
Korn/Ferry International, together with its subsidiaries, provides talent management solutions worldwide. Korn/Ferry International is one of United States’s large-cap stocks that saw some insider selling over the past three months, with insiders divesting from 90.25k shares during this period. 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. Today we will evaluate whether these decisions are bolstered by analysts’ expectations of future growth as well as recent share price movements.
See our latest analysis for Korn/Ferry International
Which Insiders Are Selling?
More shares have been sold than bought by Korn/Ferry International’s insiders in the past three months. In total, individual insiders own less than one million shares in the business, or around 0.94% of total shares outstanding. Latest selling activities involved the following insiders: Byrne Mulrooney (management) , Debra Perry (management and board member) , Gary Burnison (board member) and Robert Rozek (management) .
Does Selling Activity Reflect Future Growth?
At first glance, analysts’ revenue growth expectations of 29.3% over the next three years illustrates a good outlook for the company. However this is inconsistent with the signal company insiders are sending with their net selling activity. Digging deeper into the line items, analysts anticipate a rather subdued top-line growth over the next year, however, earnings growth is expected to be strong at 25.9%. This may mean the company’s cost-cutting initiative will be significant enough to boost earnings. However, insiders may recognise this is not a sustainable practice and this negative sentiment is evidenced by their net selling activity. Or they may simply view the current share price is well-above the intrinsic value, providing a prime time to sell.
Did Insiders Sell 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. In the past three months, Korn/Ferry International’s share price reached a high of $67.95 and a low of $54.68. This indicates moderate volatility with a share price movement of 24.27%. 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.
Next Steps:
Korn/Ferry International’s insiders’ meaningful divestments tells us that their shares have recently fallen out of favour, however, this is rather cautious relative to analysts’ earnings expectation, and the share price movement may be too trivial to cash in on any 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. there are two important aspects you should look at:
Financial Health: Does Korn/Ferry International 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 Korn/Ferry International? 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.
