Zebra Technologies Corporation’s (NASDAQ:ZBRA) Insiders Just Sold Shares – Should You?

Zebra Technologies Corporation, together with its subsidiaries, designs, manufactures, and sells a range of automatic identification and data capture (AIDC) products worldwide. Zebra Technologies is one of United States’s large-cap stocks that saw some insider selling over the past three months, with insiders divesting from 24.76k shares during this period. It is widely considered that insider selling stock in their own companies is potentially 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, 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.

View our latest analysis for Zebra Technologies

Who Are Selling Their Shares?

NasdaqGS:ZBRA Insider Trading July 16th 18
NasdaqGS:ZBRA Insider Trading July 16th 18
Over the past three months, more shares have been sold than bought by Zebra Technologies’s insiders. In total, individual insiders own less than one million shares in the business, or around 1.24% of total shares outstanding. The following insiders have recently reduced their company holdings:
Name Management Board Total Annual Compensation
Hugh Gagnier US$01.52m
Jim Kaput
Joachim Heel US$01.88m
Michael Cho
Michael Terzich US$01.91m

Is This Consistent With Future Growth?

NasdaqGS:ZBRA Future Profit July 16th 18
NasdaqGS:ZBRA Future Profit July 16th 18
At first glance, analysts’ earnings expectations of 308.27% over the next three years illustrates a spectacular outlook for the business. However, this is inconsistent with the signal company insiders are sending with their net selling activity. Digging deeper into the line items, Zebra Technologies is believed to experience a rather subdued top-line growth over the next year, but a significantly higher expected earnings growth. Usually this discrepancy can be explained by an equally significant drop in costs. However, this exercise may not be viable over the long run which may prompt insiders to reconsider their shareholdings. Or else they may view the market has overvalued the stock, presenting a favourable environment 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. This means, if insiders believe shares were heavily undervalued recently, this would provide a prime opportunity to buy more irrespective of its growth outlook. Within the past three months, Zebra Technologies’s share price traded at a high of $160.94 and a low of $133.12. This suggests some volatility with a share price change of of 20.9%. Perhaps not a significant enough movement to warrant transactions, thus motivation may be a result of their belief in the company in the future or simply personal needs.

Next Steps:

Zebra Technologies’s insiders’ meaningful divestments tells us that their shares have recently fallen out of favour, though the positive growth in expected earnings tells us a different story, and the share price movement may be too trivial to cash in on any mispricing. But we must also be aware that insiders divesting may not actually be based their views on the company’s outlook. Furthermore, 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 important aspects you should further research:

  1. Financial Health: Does Zebra Technologies 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 Zebra Technologies? 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.