ING Groep N.V., a financial institution, provides various banking products and services to individuals, small and medium-sized enterprises, and mid-corporates. ING Groep’s insiders have divested from 11.18k shares in the large-cap stock within the past three months. A well-known argument is that insiders divesting from their own companies’ shares sends a pessimistic signal. The MIT Press (1998) published an article showing that stocks following insider selling underperformed the market by 2.7%. However, these signals may not be enough to gain conviction on whether to divest. Today we will evaluate whether these decisions are bolstered by analysts’ expectations of future growth as well as recent share price movements.
Who Are Selling Their Shares?
There were more ING Groep insiders that have sold shares than those that have bought. In total, individual insiders own less than one million shares in the business, or around 0.016% of total shares outstanding. Latest selling activities involved the following insiders:
|Name||Management||Board||Total Annual Compensation|
|Ralph A. J. Hamers||✔||€01.18m|
Is This Consistent With Future Growth?On the surface, analysts’ earnings growth projection of 11.85% over the next three years provides a satisfactory outlook for the company. However this is inconsistent with the signal company insiders are sending with their net selling activity. Probing further into annual growth rates, ING Groep is expected to experience a rather subdued top-line growth over the next year, true Improved cost management and revenue growth initiatives could lead to higher earnings growth in the future. However, insiders seem to have a cautious outlook of the company as evidenced by their net selling activities. Or they may simply view the current share price is well-above the intrinsic value, providing a prime time to sell.
Did Insiders Sell On Share Price Volatility?Another factor we should consider is whether the timing of these insider transactions coincide with any significant share price movements. Volatility provides an opportunity to trade on market inefficiencies when the stock is under-priced compared to the stock’s intrinsic value. ING Groep’s shares ranged between €14.46 and €12.29 over the past three months. This suggests reasonable volatility with a change of 17.64%. This may not be large enough to warrant any significant divesting, therefore the underlying driver may be the insiders’ belief of company growth prospects or simply their personal portfolio diversification needs.
ING Groep’s net selling activity tells us the stock has fallen out of favour with some insiders as of late, though the positive growth in expected earnings tells us a different story, and the share price movement may be too trivial to cash in on any mispricing. However, it’s important to keep in mind, insider selling may not necessarily be based on their belief of the company’s ability to perform in the future. Furthermore, while insider transactions could be a helpful signal, it is definitely not sufficient on its own to make an investment decision. I’ve compiled two important factors you should further research:
- Financial Health: Does ING Groep 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 ING Groep? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!