Raymond Limited manufactures and sells worsted fabrics in India and internationally. Raymond is one of India’s large-cap stocks that saw some insider buying over the past three months, with insiders investing in 39.10k shares during this period. Generally, insiders buying more shares in their own firm sends a bullish signal. A two-decade research published in The MIT Press (1998) showed that stocks following insider buying outperformed the market by 4.5%. However, these signals may not be enough to gain conviction on whether to invest. I’ve analysed two possible reasons driving the insiders’ decision to ramp up their investment of late.Check out our latest analysis for Raymond
Who Are The Insiders?
There were more Raymond insiders that have bought shares than those that have sold. In total, individual insiders own over 2.48 million shares in the business, which makes up around 4.04% of total shares outstanding. Insiders that have recently bought more shares are:
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Is Future Growth Outlook As Bullish?
To the outsider, Raymond’s future looks positive. Digging deeper into the line items, Raymond is believed to experience a strong double-digit revenue growth next year, which appears to flow through to larger earnings growth expectations. 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 Stock Price Volatility Instigate Buying?
Alternatively, the timing of these insider transactions may have been driven by share price volatility. A correlation could mean directors are trading on market inefficiencies based on their belief of the company’s intrinsic value. Raymond’s shares ranged between ₹1132.35 and ₹890.5 over the past three months. This indicates some volatility with a share price change of of 27.16%. This may not be large enough to warrant any significant purchases, therefore the underlying driver may be the insiders’ belief of company growth prospects or simply their personal portfolio rebalancing.
Raymond’s insider meaningful buying activity tells us the shares are currently in favour, coherent with the sizeable growth in expected earnings, though share price volatility was perhaps inconsequential to cash in on 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 essential aspects you should further examine:
- Financial Health: Does Raymond 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 Raymond? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!