What Do DHI Group Inc (NYSE:DHX) Insiders Know That You Don't?

DHI Group, Inc. provides data, insights, and connections services to professional communities in the United States and internationally. DHI Group's insiders have invested 945,059 shares in the small-cap stocks within the past three months. It is widely considered that insider buying stock in their own companies is potentially a bullish signal. A two-decade research published in The MIT Press (1998) showed 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’ve assessed two potential reasons behind the insiders’ latest motivation to buy more shares.

Check out our latest analysis for DHI Group

Which Insiders Are Buying?

Over the past three months, more shares have been bought than sold by DHI Group's' insiders. In total, individual insiders own over 5 million shares in the business, which makes up around 10.37% of total shares outstanding. The entity that bought on the open market in the last three months was TCS Capital Management 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.

Is Future Growth Outlook As Bullish?

On the surface, there are dark clouds on the horizon for DHI Group. Probing further into annual growth rates,DHI Group is believed to experience decline in top-line growth next year, which could imply some headwinds going forward. This is expected to impact its bottom line next year given the large negative growth rate expected, indicating cost-cutting may not be able to pull it through into a positive growth region yet. However, company insiders appear to know something the market doesn’t and have been investing more money into the stock. This may mean they believe in a turnaround or believe the stock is well-undervalued by negative market sentiment.

Did Insiders Buy On Share Price Volatility?

Alternatively, the timing of these insider transactions may have been driven by share price volatility. Volatility provides an opportunity to trade on market inefficiencies when the stock is under-priced compared to the stock’s intrinsic value. DHI Group’s shares ranged between $3.1 and $1.25 over the past three months. This suggests a substantial share price volatility with a change of 148%. Insiders could perceive this meaningful movement as an opportunity to accumulate their shareholdings.

Next Steps:

DHI Group’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. I've put together two key factors you should further research:

1. Financial Health: Does DHI Group 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 DHI Group? 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.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.