QMS Media Limited provides out-of-home advertising and media services in Australia and internationally. QMS Media is one of Australia’s small-cap stocks that saw some insider buying over the past three months, with insiders investing in more than 13.17 million shares during this period. Generally, insiders buying more shares in their own firm sends 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. Today we will evaluate whether these decisions are bolstered by analysts’ expectations of future growth as well as recent share price movements. View out our latest analysis for QMS Media
Which Insiders Are Buying?
Over the past three months, more shares have been bought than sold by QMS Media’s’ insiders. In total, individual insiders own over 57.95 million shares in the business, which makes up around 17.83% of total shares outstanding. The entity that bought on the open market in the last three months was Ellerston Capital Limited Morgan Stanley Investment Banking and Brokerage Investments Regal Funds Management Pty 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 This Consistent With Future Growth?On the surface, analysts’ earnings growth projection of 15.88% over the next three years provides a positive outlook for the company which is consistent with the signal company insiders are sending with their net buying activity. Delving deeper into the line items, analysts anticipate a strong double-digit revenue growth next year, which has not flown down into earnings expectations based on its negative growth rate of -6.73%. This means cost growth is anticipated to outstrip revenues, indicating a period of investment and growth in the company. This seems to be supported by insiders’ conviction illustrated by their net buying activities. Or else they may simply deem the company as undervalued by the market based on future growth it could produce.
Can Share Price Volatility Explain The Buy?Another factor we should consider is whether the timing of these insider transactions coincide with any significant share price movements. Volatility provides an opportunity to trade on market inefficiencies when the stock is under-priced compared to the stock’s intrinsic value. QMS Media’s shares ranged between A$1.16 and A$0.98 over the past three months. This suggests reasonable volatility with a change of 18.37%. 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 portfolio rebalancing.
QMS Media’s net buying tells us the stock is in favour with some insiders, though negative growth in expected earnings contests this assumption, and the relatively stable stock price may not warrant exploiting any mispricing. Although insider buying can be a useful prompt, following the lead of an insider, however, will never replace diligent research. I’ve compiled two key aspects you should further research:
- Financial Health: Does QMS Media 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 QMS Media? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!