Awilco Drilling PLC provides contract drilling services to oil and gas companies in the United Kingdom. Awilco Drilling’s insiders have invested more than 5.7 million 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, these signals may not be enough to gain conviction on whether to invest. I’ve assessed two potential reasons behind the insiders’ latest motivation to buy more shares.View out our latest analysis for Awilco Drilling
Which Insiders Are Buying?
More shares have been bought than sold by Awilco Drilling insiders in the past three months. In total, individual insiders own less than one million shares in the business, or around 0.83% of total shares outstanding. The entity that bought on the open market in the last three months was Awilhelmsen AS QVT Financial LP. Although this is an institutional investor, rather than a company executive or board member, the insights gained from direct access to management as a large investor would make it more well-informed than the average retail investor. In this specific instance, I would classify this investor as a company insider.
Is This Consistent With Future Growth?
On the surface, analysts’ earnings growth projection of -106.77% over the next three years provides poor outlook for the company, however, this is contrary to the signal company insiders are sending with their net buying activity. Delving deeper into the line items, Awilco Drilling is expected to experience decline in top-line growth next year, which could imply some headwinds going forward. This will likely flow through to its earnings next year, illustrated by a highly negative growth expectation, indicating cost-cutting may not be able to pull it through into a positive growth region yet. However, company insiders appear to know something the market doesn’t and have been investing more money into the stock. This may mean they believe in a turnaround or believe the stock is well-undervalued by negative market sentiment.
Can Share Price Volatility Explain The Buy?
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. Within the past three months, Awilco Drilling’s share price traded at a high of NOK51.2 and a low of NOK33.2. This suggests reasonably high share price volatility with a change of 54.22%. This movement is potentially meaningful enough to trade on if insiders believe the market has mispriced their companies’ shares.
Awilco Drilling’s insider meaningful buying activity tells us the shares are currently in favour, however, earnings expectations tell a different story, whilst a moderate share price movement could provide incentive to buy now. Although insider buying can be a useful prompt, following the lead of an insider, however, will never replace diligent research. there are two essential factors you should look at:
- Financial Health: Does Awilco Drilling 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 Awilco Drilling? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!