EastGroup Properties, Inc. is a self-administered equity real estate investment trust focused on the development, acquisition and operation of industrial properties in major Sunbelt markets throughout the United States with an emphasis in the states of Florida, Texas, Arizona, California and North Carolina. EastGroup Properties is one of United States’s large-cap stocks that saw some insider selling over the past three months, with insiders divesting from 11.50k shares during this period. It is widely considered that insider selling stock in their own companies is potentially a bearish signal. The MIT Press (1998) published an article showing that stocks following insider selling underperformed the market by 2.7%. However, it may not be sufficient to base your investment decision merely on these signals. I’ve assessed two potential reasons behind the insiders’ latest motivation to sell their shares.
Which Insiders Are Selling?
Over the past three months, more shares have been sold than bought by EastGroup Properties’s insiders. In total, individual insiders own less than one million shares in the business, or around 2.74% of total shares outstanding.Insiders that have recently sold some of their shares are:
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Does Selling Activity Reflect Future Growth?
Analysts’ expectations for earnings over the next 3 years of -5.7% provides negative outlook for the business, consistent with the signal company insiders are sending with their net selling activity. Digging deeper into the line items, analysts anticipate a restrained level of top-line growth over the next year, which appears to fall through into the bottom line with a growth rate of0.1%. Improved cost management and revenue growth initiatives could lead to higher earnings growth in the future. However, insiders may believe this is harder to achieve which has led to net divesting, or they may simply deem the current stock price is well-above its intrinsic value, providing a prime time to sell.
Can Share Price Volatility Explain The Sell?
Another factor we should consider is whether the timing of these insider transactions coincide with any significant share price movements. A correlation could mean directors are trading on market inefficiencies based on their belief of the company’s intrinsic value. Within the past three months, EastGroup Properties’s share price traded at a high of $98.97 and a low of $89.98. This suggests an immaterial change in share price, with a movement of 9.99%. This could indicate insider transactions are not driven by share price changes but perhaps they may simply want to diversify their holdings, distribute stock to investors, or simply require the cash for personal reasons.
EastGroup Properties’s net selling activity tells us the stock has fallen out of favour with some insiders as of late, however, this is rather cautious relative to analysts’ earnings expectation, and the share price movement may be too trivial to cash in on 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 compiled two relevant aspects you should look at:
- Financial Health: Does EastGroup Properties 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 EastGroup Properties? 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.