Did Insiders Buy On Diebold Nixdorf Incorporated’s (NYSE:DBD) Price Volatility?

Diebold Nixdorf, Incorporated provides connected commerce solutions to financial institutions and retailers in North America, the Asia Pacific, Europe, the Middle East, Africa, and Latin America. Diebold Nixdorf’s insiders have invested more than 2.41 million shares in the small-cap stocks within the past three months. Generally, insiders buying more shares in their own firm sends 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%. However, these signals may not be enough to gain conviction on whether to invest. Today we will evaluate whether these decisions are bolstered by analysts’ expectations of future growth as well as recent share price movements.

Check out our latest analysis for Diebold Nixdorf

Who Are The Insiders?

NYSE:DBD Insider Trading August 7th 18
NYSE:DBD Insider Trading August 7th 18

More shares have been bought than sold by Diebold Nixdorf insiders in the past three months. In total, individual insiders own less than one million shares in the business, or around 0.98% of total shares outstanding.

Latest buying activities involved the following insiders:
Name Management Board Total Annual Compensation
Gale Fitzgerald US$261.71k
Gerrard Schmid
Mario Gabelli US$260.71k
Patrick Allender
The entity that bought on the open market in the last three months was Atlantic Investment Management Inc. Gabelli Foundation Inc Endowment Arm GAMCO Investors Inc.. 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 This Consistent With Future Growth?

NYSE:DBD Future Profit August 7th 18
NYSE:DBD Future Profit August 7th 18

Analysts’ expectations for earnings over the next 3 years of 85.67% provides a very buoyant 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, Diebold Nixdorf is believed to experience negative growth in its top-line over the next year, which indicates the company may be facing some headwinds. Though, next year’s expected earnings will deliver a sizeable growth which may mean the company’s cost-cutting initiative will be meaningful enough to more than offset negative revenue growth. Insiders may have confidence in these cost initiatives, or believe the market has overly penalized the company’s shares, leading to an opportune time to buy.

Can Share Price Volatility Explain The Buy?

An alternative reason for recent trades could be insiders taking advantage of the 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. Within the past three months, Diebold Nixdorf’s share price traded at a high of $15.4 and a low of $6.3. This suggests a substantial share price volatility with a change of 144.44%. This meaningful movement could be a reason why insiders have decided to increase their shareholdings.

Next Steps:

Diebold Nixdorf’s net buying tells us the stock is in favour with some insiders, reinforced by the substantial earnings growth expectations, along with the high stock price volatility over the same time period. However, while insider transactions could be a helpful signal, it is definitely not sufficient on its own to make an investment decision. I’ve compiled two essential aspects you should further research:

  1. Financial Health: Does Diebold Nixdorf 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 Diebold Nixdorf? 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 editorial-team@simplywallst.com.