Stock Analysis

Have Insiders Been Buying Encore Capital Group, Inc. (NASDAQ:ECPG) Shares This Year?

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NasdaqGS:ECPG
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It is not uncommon to see companies perform well in the years after insiders buy shares. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So shareholders might well want to know whether insiders have been buying or selling shares in Encore Capital Group, Inc. (NASDAQ:ECPG).

Do Insider Transactions Matter?

It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.

See our latest analysis for Encore Capital Group

The Last 12 Months Of Insider Transactions At Encore Capital Group

Over the last year, we can see that the biggest insider purchase was by Independent Director Wendy Hannam for US$78k worth of shares, at about US$31.01 per share. So it's clear an insider wanted to buy, at around the current price, which is US$33.41. That means they have been optimistic about the company in the past, though they may have changed their mind. While we always like to see insider buying, it's less meaningful if the purchases were made at much lower prices, as the opportunity they saw may have passed. In this case we're pleased to report that the insider bought shares at close to current prices. Wendy Hannam was the only individual insider to buy during the last year.

You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

insider-trading-volume
NasdaqGS:ECPG Insider Trading Volume February 17th 2021

There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).

Does Encore Capital Group Boast High Insider Ownership?

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Encore Capital Group insiders own about US$15m worth of shares. That equates to 1.5% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Do The Encore Capital Group Insider Transactions Indicate?

The fact that there have been no Encore Capital Group insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. Insiders own shares in Encore Capital Group and we see no evidence to suggest they are worried about the future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. You'd be interested to know, that we found 1 warning sign for Encore Capital Group and we suggest you have a look.

Of course Encore Capital Group may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.

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What are the risks and opportunities for Encore Capital Group?

Encore Capital Group, Inc., a specialty finance company, provides debt recovery solutions and other related services for consumers across financial assets worldwide.

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Rewards

  • Trading at 32.1% below our estimate of its fair value

  • Earnings grew by 10.2% over the past year

Risks

  • Earnings are forecast to decline by an average of 48.6% per year for the next 3 years

  • Debt is not well covered by operating cash flow

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Share Price

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1Y Return

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Encore Capital Group

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