It is not uncommon to see companies perform well in the years after insiders buy shares. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So before you buy or sell Ever Sunshine Lifestyle Services Group Limited (HKG:1995), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
We don’t think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year’.
Ever Sunshine Lifestyle Services Group Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Deputy Chairman of the Board, Feng Lin, for HK$187m worth of shares, at about HK$11.06 per share. That means that even when the share price was below the current price of HK$16.20, an insider wanted to cash in some shares. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. While insider selling is not a positive sign, we can’t be sure if it does mean insiders think the shares are fully valued, so it’s only a weak sign. This single sale was just 8.9% of Feng Lin’s stake. Feng Lin was the only individual insider to sell over the last year.
In the last twelve months insiders purchased 6.75m shares for HK$75m. On the other hand they divested 16.87m shares, for HK$187m. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
I will like Ever Sunshine Lifestyle Services Group better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. Ever Sunshine Lifestyle Services Group insiders own about HK$3.4b worth of shares (which is 13% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Ever Sunshine Lifestyle Services Group Tell Us?
The fact that there have been no Ever Sunshine Lifestyle Services Group insider transactions recently certainly doesn’t bother us. It’s great to see high levels of insider ownership, but looking back over the last year, we don’t gain confidence from the Ever Sunshine Lifestyle Services Group insiders selling. In addition to knowing about insider transactions going on, it’s beneficial to identify the risks facing Ever Sunshine Lifestyle Services Group. For example – Ever Sunshine Lifestyle Services Group has 2 warning signs we think you should be aware of.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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