CONSOL Energy Inc. produces and exports bituminous thermal and crossover metallurgical coal. CONSOL Energy is one of United States’s large-cap stocks that saw some insider selling over the past three months, with insiders divesting from 6.00k shares during this period. A well-known argument is that insiders divesting from their own companies’ shares sends a pessimistic signal. A two-decade research published in The MIT Press (1998) showed that stocks following insider selling declined 2.7% relative 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.
Who Are The Insiders?
Over the past three months, more shares have been sold than bought by CONSOL Energy’s insiders. In total, individual insiders own less than one million shares in the business, or around 0.53% of total shares outstanding. Insiders that have recently sold some of their shares are:
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Is Future Growth Outlook As Bearish?On the surface, analysts’ earnings growth projection of -15.16% over the next three years provides negative outlook for the business, consistent with the signal company insiders are sending with their net selling activity. Digging deeper into the line items, CONSOL Energy is believed to experience a limited level of revenue growth next year, although a significantly greater rate of earnings growth. Generally, this difference can be explained by a large drop in cost growth. This may not be seen as a maintainable practice by insiders, who may expect a deterioration in earnings to reflect lower revenues growth in the future. Or they may merely view the stock as overvalued by the market which provides a suitable time to sell.
Did Stock Price Volatility Instigate Selling?Another factor we should consider is whether the timing of these insider transactions coincide with any significant share price movements. This means, if insiders believe shares were heavily undervalued recently, this would provide a prime opportunity to buy more irrespective of its growth outlook. In the past three months, CONSOL Energy’s share price reached a high of $47.35 and a low of $30.86. This indicates a fairly large volatility with a share price movement of 53.43%. Insiders may deem this relatively meaningful movement as an opportunity to decrease their shareholdings. Or perhaps their reason to sell is not driven by price or growth prospects and merely by their own personal diversification or monetary needs.
CONSOL Energy’s net selling activity tells us the stock has fallen out of favour with some insiders as of late, however, this is rather cautious relative to analysts’ earnings expectation, whereas a highly volatile share price could be the driver to sell. But we must also be aware that insiders divesting may not actually be based their views on the company’s outlook. Moreover, while insider selling can be a useful prompt, following the lead of an insider, however, will never replace diligent research. I’ve compiled two essential factors you should further research:
- Financial Health: Does CONSOL Energy 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 CONSOL Energy? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
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 email@example.com.