Are Insiders Too Confident In Selecta Biosciences Inc (NASDAQ:SELB)?

Selecta Biosciences Inc’s’ (NASDAQ:SELB) is one of United States’s small-cap stocks operating in the US Biotechs industry. Selecta Biosciences saw some insider buying over the past three months, with insiders investing in 148,841 shares during this period. A well-known argument is that insiders investing more in their own companies’ shares sends an optimistic signal. A research published in The MIT Press (1998) concluded 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 Selecta Biosciences

Who Are Ramping Up Their Shares?

NasdaqGM:SELB Insider_trading Jan 23rd 18
NasdaqGM:SELB Insider_trading Jan 23rd 18
More shares have been bought than sold by Selecta Biosciences insiders in the past three months. In total, individual insiders own over 3 million shares in the business, which makes up around 11.84% of total shares outstanding. Latest buying activities involved the following insiders:
Name Management Board Total Annual Compensation
David Abraham
Earl Sands
Timothy Barabe $1,108,641
Timothy Springer $117,614
Werner Cautreels $1,969,295

Is Future Growth Outlook As Bullish?

NasdaqGM:SELB Future Profit Jan 23rd 18
NasdaqGM:SELB Future Profit Jan 23rd 18

At first glance, analysts’ earnings expectations of 80.18% 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,Selecta Biosciences is believed to experience a strong double-digit revenue growth next year, which has not been passed down into earnings expectations given its negative growth rate of -2.55%. This means cost growth is anticipated to outstrip revenues, indicating a period of investment and growth in the company. Insiders’ net buying activities seem to support the idea of growth moving forward. Or they may simply view the current share price as too low relative to its intrinsic value.

Did Stock Price Volatility Instigate Buying?

Alternatively, the timing of these insider transactions may have been driven by share price volatility. This means, if insiders believe shares were heavily undervalued recently, this would provide a prime opportunity to buy more irrespective of its growth outlook. Selecta Biosciences’s shares ranged between $22.53 and $8.62 over the past three months. This indicates meaningful movements in the share price with a change of 161.37%. Insiders could perceive this meaningful movement as an opportunity to accumulate their shareholdings.

Next Steps:

Selecta Biosciences’s net buying tells us the stock is in favour with some insiders, although the expected earnings growth challenges this conclusion, whereas a highly volatile share price could be the driver to buy. Although insider buying can be a useful prompt, following the lead of an insider, however, will never replace diligent research. there are two fundamental factors you should look at:

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.