Why Did Fluidigm Corporation’s’ (NASDAQ:FLDM) Insiders Buy Up More Shares?

Fluidigm Corporation creates, manufactures, and markets technologies and tools for life sciences research in the United States and Europe. Fluidigm’s insiders have invested 772,529 shares in the small-cap stocks within the past three months. Generally, insiders buying more shares in their own firm sends a bullish signal. The MIT Press (1998) published an article showing that stocks following insider buying outperformed the market by 4.5%. But these signals may not be sufficient to gain confidence on whether to invest. I will be analysing whether these buying activities are supported by favourable future outlook and recent share price volatility.

Check out our latest analysis for Fluidigm

Which Insiders Are Buying?

NasdaqGS:FLDM Insider_trading Mar 27th 18
NasdaqGS:FLDM Insider_trading Mar 27th 18
Over the past three months, more shares have been bought than sold by Fluidigm’s’ insiders. In total, individual insiders own less than one million shares in the business, or around 1.28% of total shares outstanding. Latest buying activities involved the following insiders:
Name Management Board Total Annual Compensation
John Levin
The entity that bought on the open market in the last three months was Levin Capital Strategies L.P.. Although this is an institutional investor, rather than a company executive or board member, the insights gained from direct access to management as a large investor would make it more well-informed than the average retail investor. In this specific instance, I would classify this investor as a company insider.

Is This Consistent With Future Growth?

NasdaqGS:FLDM Future Profit Mar 27th 18
NasdaqGS:FLDM Future Profit Mar 27th 18

Analysts’ expectations for earnings over the next 3 years of 54.21% provides an upbeat outlook going forward which is consistent with the signal company insiders are sending with their net buying activity. Digging deeper into the line items,Fluidigm is expected to experience a limited level of revenue growth next year, but a strong double-digit earnings growth of 13.79%. This may mean the company’s cost-cutting initiative will be significant enough to boost earnings. Insiders ramping up shares could gesture confidence in sustainable growth rates. Or they may merely see a buying opportunity due to undervaluation at the current share price.

Did Insiders Buy On Share Price Volatility?

Another factor we should consider is whether the timing of these insider transactions coincide with any significant share price movements. Volatility provides an opportunity to trade on market inefficiencies when the stock is under-priced compared to the stock’s intrinsic value. Fluidigm’s shares ranged between $7.97 and $5.75 over the past three months. This suggests a relatively high volatility with large change of 38.61%. Insiders may deem this relatively meaningful movement as an opportunity to increase their shareholdings.

Next Steps:

Fluidigm’s net buying tells us the stock is in favour with some insiders, which is coherent with the positive growth in expected earnings, on top of a reasonable share price movement around the same time. However, while insider transactions could be a helpful signal, it is definitely not sufficient on its own to make an investment decision. I’ve compiled two relevant factors you should further examine:

  1. Financial Health: Does Fluidigm 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 Fluidigm? 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.