Apollo Medical Holdings, Inc., an integrated health care delivery and management company, provides medical care services. Apollo Medical Holdings is one of United States’s small-cap stocks that saw some insider selling over the past three months, with insiders divesting from 192.52k shares during this period. 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, it may not be sufficient to base your investment decision merely on these signals. I will be analysing whether these selling activities are supported by favourable future outlook and recent share price volatility.
Who Are The Insiders?
More shares have been sold than bought by Apollo Medical Holdings’s insiders in the past three months. In total, individual insiders own over 9.29 million shares in the business, which makes up around 27.88% of total shares outstanding. Latest selling activities involved the following insiders:
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Is This Consistent With Future Growth?On the surface, analysts’ earnings growth projection of -14.93% 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, Apollo Medical Holdings is believed to experience a sizeable revenue growth over the next year, which has not been passed down into earnings expectation given its negative growth of -9.74%. This means cost growth is anticipated to outstrip revenues, and could indicate a period of investment and growth in the company. However, insiders seem to carry the negative sentiment evidenced by their net selling activity. Or they may simply view the current share price is well-above the intrinsic value, providing a prime time to sell.
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. 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, Apollo Medical Holdings’s share price reached a high of $30 and a low of $13.21. This indicates meaningful movements in the share price with a change of 127.1%. Insiders could perceive this meaningful movement as an opportunity to reduce their shareholdings. Or else, they may simply sell for their own portfolio diversification purposes or need cash for personal reasons.
Apollo Medical Holdings’s net selling activity tells us the stock has fallen out of favour with some insiders as of late, reinforced by the negative earnings growth expectations, along with the high stock price volatility over the same time period. But we must also be aware that insiders divesting may not actually be based their views on the company’s outlook. Furthermore, while insider transactions could be a helpful signal, it is definitely not sufficient on its own to make an investment decision. there are two essential factors you should further research:
- Financial Health: Does Apollo Medical Holdings 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 Apollo Medical Holdings? 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 firstname.lastname@example.org.