Sterling Bancorp operates as the bank holding company for Sterling National Bank that provides various banking services to commercial, consumer, and municipal clients in the United States. Sterling Bancorp’s insiders have divested from 230.43k shares in the large-cap stock within the past three months. It is widely considered that insider selling stock in their own companies is potentially a bearish signal. A research published in The MIT Press (1998) concluded that stocks following insider selling fell 2.7% compared to the market. 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.
Which Insiders Are Selling?
Over the past three months, more shares have been sold than bought by Sterling Bancorp’s insiders. In total, individual insiders own over 4.42 million shares in the business, which makes up around 1.96% of total shares outstanding.Insiders that have recently sold some of their shares are:
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Is Future Growth Outlook As Bearish?
At first glance, analysts’ earnings expectations of 132% over the next three years illustrates a fantastic outlook for the business. However, this is inconsistent with the signal company insiders are sending with their net selling activity. Probing further into annual growth rates, Sterling Bancorp is expected to experience a double-digit top-line growth over the 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. Yet insiders’ selling action seem to contradict this optimistic earnings outlook which means they may perceive things differently to the market. They may deem the high growth is not sustainable or positive sentiment has been overly factored into the stock price.
Can Share Price Volatility Explain The Sell?
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, Sterling Bancorp’s share price reached a high of $25.3 and a low of $21.8. This indicates moderate volatility with a share price movement of 16.06%. Insiders’ purchases may not be driven by this movement but perhaps they may simply want to diversify their holdings, distribute stock to investors, or simply require the cash for personal reasons.
Sterling Bancorp’s insiders’ meaningful divestments tells us that their shares have recently fallen out of favour, though the positive growth in expected earnings tells us a different story, and the share price has not moved significantly to warrant reassessment of mispricing. However it’s crucial to note that insider divesting may have nothing to do with their views on the company’s future performance. Furthermore, while insider transactions could be a helpful signal, it is definitely not sufficient on its own to make an investment decision. I’ve put together two important aspects you should further research:
- Financial Health: Does Sterling Bancorp 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 Sterling Bancorp? 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.