Yahoo Finance Navitas Limited’s (ASX:NVT) Insiders Ramped Up Holdings – Should You?
Navitas Limited provides educational services for students and professionals in Australia, the United Kingdom, Europe, Asia, Canada, the United States, and internationally. Navitas is one of Australia’s large-cap stocks that saw some insider buying over the past three months, with insiders investing in more than 9.58 million shares during this period. A well-known argument is that insiders investing more in their own companies’ shares sends an optimistic signal. A research published in The MIT Press (1998) concluded that stocks following insider buying outperformed the market by 4.5%. However, it may not be sufficient to base your investment decision merely on these signals. I’ve analysed two possible reasons driving the insiders’ decision to ramp up their investment of late.
View our latest analysis for Navitas
Which Insiders Are Buying?
There were more Navitas insiders that have bought shares than those that have sold. In total, individual insiders own over 109.48 million shares in the business, which makes up around 30.57% of total shares outstanding. . The entity that bought on the open market in the last three months was Colonial First State Asset Management (Australia) Limited Orbis Investment Management Limited. 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.
Does Buying Activity Reflect Future Growth?
Analysts’ expectations for earnings over the next 3 years of 74.07% provides a great outlook going forward which is consistent with the signal company insiders are sending with their net buying activity. Probing further into annual growth rates, Navitas is expected to experience decline in top-line growth next year, which could imply some headwinds going forward. Though, next year’s expected earnings will deliver a sizeable growth which may indicate the company’s cost controls will show meaningful results, offsetting the fall in revenue growth. Insider buying activities show that they have confidence in its ability to continue growing. They could believe the company is in the midst of a successful turnaround or simply deem the stock is well-below its intrinsic value, with negative sentiment over-discounting the share price.
Did Insiders Buy On Share Price Volatility?
An alternative reason for recent trades could be insiders taking advantage of the share price volatility. This means, if insiders believe shares were heavily undervalued recently, this would provide a prime opportunity to buy more irrespective of its growth outlook. Navitas’s shares ranged between A$4.64 and A$4.09 over the past three months. This suggests an immaterial change in share price, with a movement of 13.59%. 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 portfolio rebalancing.
Next Steps:
Navitas’s insider meaningful buying activity tells us the shares are currently in favour, reinforced by the substantial earnings growth expectations, though share price volatility was perhaps inconsequential to cash in on any mispricing. Although insider buying can be a useful prompt, following the lead of an insider, however, will never replace diligent research. there are two relevant factors you should further examine:
Financial Health: Does Navitas 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 Navitas? 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.
