Sandstorm Gold Ltd. operates as a gold streaming and royalty company. Sandstorm Gold’s insiders have divested from 300.00k shares in the small-cap stock within the past three months. A well-known argument is that insiders divesting from their own companies’ shares sends a pessimistic signal. A two-decade research published in The MIT Press (1998) showed that stocks following insider selling declined 2.7% relative to the market. However, it may not be sufficient to base your investment decision merely on these signals. I’ve analysed two possible reasons driving the insiders’ decision to reduce their investment of late.
Who Are Selling Their Shares?
Over the past three months, more shares have been sold than bought by Sandstorm Gold’s insiders. In total, individual insiders own over 3.05 million shares in the business, which makes up around 1.66% of total shares outstanding.Latest selling activities involved the following insiders:
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Is This Consistent With Future Growth?
On the surface, Sandstorm Gold’s future looks good. Delving deeper into the line items, Sandstorm Gold is expected to experience a strong double-digit revenue growth next year, which is expected to drive significant expected earnings growth as well. This could indicate significant cost-cutting activities or a high degree of economies of scale which may have a compounding impact in the future. However, company insiders appear to know something the market doesn’t and have been divesting from the stock. This may mean they believe the impressive net income growth is hard to sustain or that optimistic sentiment has led to inflation of the share price.
Did Stock Price Volatility Instigate Selling?
Another factor we should consider is whether the timing of these insider transactions coincide with any significant share price movements. A correlation could mean directors are trading on market inefficiencies based on their belief of the company’s intrinsic value. In the past three months, Sandstorm Gold’s share price reached a high of CA$6.15 and a low of CA$4.65. This indicates moderate volatility with a share price movement of 32.26%. 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.
Sandstorm Gold’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, while a relatively volatile share price could be the motivation to trade. However it’s crucial to note that insider divesting may have nothing to do with their views on the company’s future performance. Moreover, while insider selling can be a useful prompt, following the lead of an insider, however, will never replace diligent research. I’ve put together two essential aspects you should further research:
- Financial Health: Does Sandstorm Gold 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 Sandstorm Gold? 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 firstname.lastname@example.org.