Obsidian Energy Ltd’s’ (TSE:OBE) is one of Canada’s small-cap stocks operating in the CA Oil and Gas industry. Obsidian Energy saw some insider buying over the past three months, with insiders investing in more than 18 million shares during this period. A well-known argument is that insiders investing more in their own companies’ shares sends an optimistic signal. A two-decade research published in The MIT Press (1998) showed 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 our latest analysis for Obsidian Energy
Who Are Ramping Up Their Shares?
Over the past three months, more shares have been bought than sold by Obsidian Energy’s’ insiders. In total, individual insiders own over 36 million shares in the business, which makes up around 7.12% of total shares outstanding. Insiders that have recently bought more shares are:
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Is Future Growth Outlook As Bullish?
At first sight, Obsidian Energy’s future looks good. Delving deeper into the line items,Obsidian Energy is expected to experience a healthy double-digit top-line growth next year, which seems to drive higher expected earnings per share growth as well. This may mean the company is reaping meaningful benefits from past growth initiatives, placing it in a beneficial position for future profits. This appears to be bolstered by insiders’ net buying activities signalling their confidence. Or they may simply view the share price is currently too low compared to the share’s intrinsic value.
Did Stock Price Volatility Instigate Buying?
An alternative reason for recent trades could be insiders taking advantage of the share price volatility. A correlation could mean directors are trading on market inefficiencies based on their belief of the company’s intrinsic value. Within the past three months, Obsidian Energy’s share price traded at a high of CA$1.81 and a low of CA$1.25. This indicates reasonably high share price volatility with a change of 44.8%. This movement could potentially be significant enough to warrant insiders to accrue their shares.
Obsidian Energy’s net buying tells us the stock is in favour with some insiders, although the expected earnings growth challenges this conclusion, while a relatively volatile share price could be the motivation to trade. However, while insider transactions could be a helpful signal, it is definitely not sufficient on its own to make an investment decision. there are two fundamental aspects you should look at:
1. Financial Health: Does Obsidian Energy 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 Obsidian Energy? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!