Stock Analysis
As Zhihu Inc. (NYSE:ZH) drops to US$723m market cap, insiders might rethink their CN¥2.5m stock purchase earlier this year
Insiders who acquired CN¥2.5m worth of Zhihu Inc.'s (NYSE:ZH) stock at an average price of CN¥1.37 in the past 12 months may be dismayed by the recent 9.4% price decline. This is not good as insiders invest based on expectations that their money will appreciate over time. However, as a result of recent losses, their original investment is now worth only CN¥2.2m.
Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.
View our latest analysis for Zhihu
The Last 12 Months Of Insider Transactions At Zhihu
The insider Leonard Blavatnik made the biggest insider purchase in the last 12 months. That single transaction was for US$2.5m worth of shares at a price of US$1.52 each. That means that even when the share price was higher than US$1.16 (the recent price), an insider wanted to purchase shares. It's very possible they regret the purchase, but it's more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing shares. It is encouraging to see an insider paid above the current price for shares, as it suggests they saw value, even at higher levels. Leonard Blavatnik was the only individual insider to buy during the last year.
The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
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. Zhihu insiders own 20% of the company, currently worth about US$141m based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Zhihu Tell Us?
There haven't been any insider transactions in the last three months -- that doesn't mean much. On a brighter note, the transactions over the last year are encouraging. It would be great to see more insider buying, but overall it seems like Zhihu insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for 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. For example - Zhihu has 3 warning signs we think you should be aware of.
Of course Zhihu 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.
What are the risks and opportunities for Zhihu?
Zhihu Inc. operates an online content community in the People’s Republic of China.
Rewards
Trading at 16.8% below our estimate of its fair value
Revenue is forecast to grow 18.89% per year
Revenue grew by 21.8% over the past year
Risks
Shareholders have been diluted in the past year
Volatile share price over the past 3 months
Currently unprofitable and not forecast to become profitable over the next 3 years
Further research on
Zhihu
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
About NYSE:ZH
Zhihu
Zhihu Inc. operates an online content community in the People’s Republic of China.
Excellent balance sheet and fair value.
