What EMC Insurance Group Inc’s (NASDAQ:EMCI) Insiders Know That You Don’t

EMC Insurance Group Inc., an insurance holding company, provides property and casualty insurance, and reinsurance products in the United States. EMC Insurance Group is one of United States’s small-cap stocks that saw some insider selling over the past three months, with insiders divesting from 3.83k shares during this period. Generally, insiders selling shares in their own firm sends a bearish 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. I’ve assessed two potential reasons behind the insiders’ latest motivation to sell their shares. Check out our latest analysis for EMC Insurance Group

Who Are The Insiders?

NasdaqGS:EMCI Insider_trading July 12th 18
NasdaqGS:EMCI Insider_trading July 12th 18
More shares have been sold than bought by EMC Insurance Group’s insiders in the past three months. In total, individual insiders own less than one million shares in the business, or around 3.28% of total shares outstanding. Latest selling activities involved the following insiders:
Name Management Board Total Annual Compensation
Elizabeth Nigut
Lisa Simonetta US$0732.95k
Mark Reese

Is Future Growth Outlook As Bearish?

NasdaqGS:EMCI Future Profit July 12th 18
NasdaqGS:EMCI Future Profit July 12th 18
On the surface, there are dark clouds on the horizon for EMC Insurance Group. Digging deeper into the line items, EMC Insurance Group is believed to experience decline in top-line growth next year, which could imply some headwinds going forward. This is expected to impact its bottom line next year given the large negative growth rate expected, indicating cost-cutting may not be able to pull it through into a positive growth region yet. Selling activities by insiders seem to be consistent with this pessimistic future prospect. Or they may simply deem the current share price is well-above its intrinsic value, providing an opportune time to sell.

Can Share Price Volatility Explain The Sell?

An alternative reason for recent trades could be insiders taking advantage of the share price volatility. A correlation could mean directors are trading on market inefficiencies based on their belief of the company’s intrinsic value. EMC Insurance Group’s shares ranged between $29.18 and $25.06 over the past three months. This suggests some volatility with a share price change of of 16.44%. This may not be large enough to warrant any significant divesting, therefore the underlying driver may be the insiders’ belief of company growth prospects or simply their personal portfolio diversification needs.

Next Steps:

EMC Insurance Group’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, even if the low share price volatility did not warrant exploiting any 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. there are two fundamental factors you should further examine:

  1. Financial Health: Does EMC Insurance Group 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.
  2. Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of EMC Insurance Group? 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.