IQVIA Holdings Inc. provides integrated information and technology-enabled healthcare services in the Americas, Europe, Africa, and the Asia-Pacific. IQVIA Holdings’s insiders have divested from more than 11.25 million shares in the large-cap stock within the past three months. Generally, insiders selling shares in their own firm sends a bearish signal. A research published in The MIT Press (1998) concluded that stocks following insider selling fell 2.7% compared 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. View out our latest analysis for IQVIA Holdings
Which Insiders Are Selling?
There were more IQVIA Holdings insiders that have sold shares than those that have bought. In total, individual insiders own over 10.63 million shares in the business, which makes up around 5.26% of total shares outstanding. The entity that sold on the open market in the last three months was Bain Capital LP Canada Pension Plan Investment Board TPG Capital 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 Future Growth Outlook As Bearish?Analysts’ expectations for earnings over the next 3 years of -42.51% provides poor outlook for the company, consistent with the signal company insiders are sending with their net selling activity. Digging deeper into the line items, IQVIA Holdings is believed to experience a double-digit top-line growth over the next year, which has not been passed down to earnings expectations given its large negative growth expectations. This means cost growth is anticipated to outstrip revenues, indicating a period of investment and growth in the company. Insider selling activities seem to support this continued negative earnings outlook. Or perhaps they view the stock as overvalued by the market which provides an opportune time to sell.
Did Stock Price Volatility Instigate Selling?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. Within the past three months, IQVIA Holdings’s share price traded at a high of $107.27 and a low of $94.85. This indicates an immaterial change in share price, with a movement of 13.09%. This may mean insiders’ motivation to trade may not be driven by the share price but rather other factors such as their belief in company growth or their personal portfolio diversification needs.
IQVIA Holdings’s net selling activity tells us the stock has fallen out of favour with some insiders as of late, coherent with the poor growth in expected earnings, 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. Moreover, while insider selling can be a useful prompt, following the lead of an insider, however, will never replace diligent research. I’ve put together two fundamental aspects you should further examine:
- Financial Health: Does IQVIA Holdings 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.
- Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of IQVIA Holdings? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!