Immunomedics, Inc., a clinical-stage biopharmaceutical company, focuses on the development of monoclonal antibody-based products for the targeted treatment of cancer, autoimmune disorders, and other diseases. Immunomedics is one of United States’s large-cap stocks that saw some insider buying over the past three months, with insiders investing in more than 1 million shares during this period. A well-known argument is that insiders investing more in their own companies’ shares sends an optimistic signal. A two-decade research published in The MIT Press (1998) showed that stocks following insider buying outperformed the market by 4.5%. However, it may not be sufficient to base your investment decision merely on these signals. I will be analysing whether these buying activities are supported by favourable future outlook and recent share price volatility.See our latest analysis for Immunomedics
Who Are The Insiders?
There were more Immunomedics insiders that have bought shares than those that have sold. In total, individual insiders own over 6 million shares in the business, which makes up around 3.69% of total shares outstanding. The entity that bought on the open market in the last three months was venBio Select Advisor LLC. 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.
Does Buying Activity Reflect Future Growth?
At first glance, analysts’ earnings expectations of 83.63% over the next three years illustrates a spectacular outlook for the business which is consistent with the signal company insiders are sending with their net buying activity. Delving deeper into the line items,analysts anticipate an impressive double-digit top-line growth next year, which is expected to drive significant expected earnings growth as well. This may mean the company is reaping benefits from past growth initiatives, placing it in a beneficial position for future profits. If insiders believe these benefits are defensible, this could be a motivation for the net buying activity. Another reason could simply be they deem the shares under-priced given the growth potential the business could produce.
Did Stock Price Volatility Instigate Buying?
Alternatively, the timing of these insider transactions may have been driven by share price volatility. A correlation could mean directors are trading on market inefficiencies based on their belief of the company’s intrinsic value. In the past three months, Immunomedics’s share price reached a high of $16.32 and a low of $9. This indicates a substantial share price volatility with a change of 81.33%. This meaningful movement could be a reason why insiders have decided to increase their shareholdings.
Immunomedics’s net buying tells us the stock is in favour with some insiders, coherent with the sizeable growth in expected earnings, in addition to the large 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 put together two essential factors you should look at:
1. Financial Health: Does Immunomedics 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 Immunomedics? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!