What Do Super Retail Group Limited (ASX:SUL) Insiders Know That You Don’t?

Super Retail Group Limited operates as a retailer of auto, leisure, and sports products in Australia, New Zealand, and China. Super Retail Group is one of Australia’s large-cap stocks that saw some insider buying over the past three months, with insiders investing in more than 14 million shares during this period. A well-known argument is that insiders investing more in their own companies’ shares sends an optimistic signal. A research published in The MIT Press (1998) concluded 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’ve analysed two possible reasons driving the insiders’ decision to ramp up their investment of late.

See our latest analysis for Super Retail Group

Who Are Ramping Up Their Shares?

ASX:SUL Insider_trading May 15th 18
ASX:SUL Insider_trading May 15th 18
More shares have been bought than sold by Super Retail Group insiders in the past three months. In total, individual insiders own over 59 million shares in the business, which makes up around 30.02% of total shares outstanding. Insiders that have recently ramped up their holdings are:
Name Management Board Total Annual Compensation
Launa Inman $168,657
The entity that bought on the open market in the last three months was Everney Pty Ltd UBS Asset Management Vinva Investment Management Yarra 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.

Does Buying Activity Reflect Future Growth?

ASX:SUL Future Profit May 15th 18
ASX:SUL Future Profit May 15th 18

At first glance, analysts’ earnings expectations of 70.23% over the next three years illustrates an optimistic outlook going forward which is consistent with the signal company insiders are sending with their net buying activity. Delving deeper into the line items,Super Retail Group is expected to experience a restrained level of top-line growth over the next year, although a significantly greater rate of earnings growth. Usually this discrepancy can be explained by an equally significant drop in costs. Insiders ramping up shares could gesture confidence in sustainable growth rates. Or they may merely see a buying opportunity due to undervaluation at the current 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, Super Retail Group’s share price traded at a high of A$8.22 and a low of A$6.55. This indicates some volatility with a share price change of of 25.5%. 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.

Next Steps:

Super Retail Group’s insider meaningful buying activity tells us the shares are currently in favour, which is consistent with the significant expected earnings growth, even if the low share price volatility did 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 put together two fundamental aspects you should further examine:

  1. Financial Health: Does Super Retail Group 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.
  2. Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of Super Retail Group? 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.