Why Did Yuzhou Properties Company Limited's' (HKG:1628) Insiders Buy Up More Shares?

Yuzhou Properties Company Limited, an investment holding company, engages in the investment, development, and management of real estate properties in the People’s Republic of China. Yuzhou Properties's insiders have invested 400.00k shares in the large-cap stocks within the past three months. 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%. However, it may not be sufficient to base your investment decision merely on these signals. Today we will evaluate whether these decisions are bolstered by analysts’ expectations of future growth as well as recent share price movements. See our latest analysis for Yuzhou Properties

Who Are The Insiders?

More shares have been bought than sold by Yuzhou Properties insiders in the past three months. In total, individual insiders own over 2617.93 million shares in the business, which makes up around 62.53% of total shares outstanding. Insiders that have recently ramped up their holdings are:

Name	Management	Board	Total Annual Compensation
Lung Lam	✔	✔	CN¥01.75m

Is Future Growth Outlook As Bullish?

At first glance, analysts’ earnings expectations of 115.43% over the next three years illustrates an exceptional outlook for the business which is consistent with the signal company insiders are sending with their net buying activity. Delving deeper into the line items, Yuzhou Properties is expected to experience a healthy double-digit top-line growth next year, which seems to drive higher expected earnings 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. If insiders recognised this, a signal of their confidence may be their higher shareholdings in the company. Or they may simply view the share price is currently too low compared to the share’s intrinsic value.

Did Insiders Buy On Share Price Volatility?

An alternative reason for recent trades could be insiders taking advantage of the share price volatility. Volatility provides an opportunity to trade on market inefficiencies when the stock is under-priced compared to the stock’s intrinsic value. In the past three months, Yuzhou Properties’s share price reached a high of HK$5.95 and a low of HK$4.31. This indicates a relatively high volatility with large change of 38.05%. Insiders may deem this relatively meaningful movement as an opportunity to increase their shareholdings.

Next Steps:

Yuzhou Properties’s net buying tells us the stock is in favour with some insiders, which is consistent with the significant expected earnings growth, and a fairly high volatility in share price over the same time period. 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 relevant factors you should look at:

1. Financial Health: Does Yuzhou Properties 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 Yuzhou Properties? 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.