Yahoo Finance What Do OZ Minerals Limited (ASX:OZL) Insiders Know That You Don’t?
OZ Minerals Limited engages in the exploration, development, mining, and processing of mining projects in Australia. OZ Minerals is one of Australia’s large-cap stocks that saw some insider buying over the past three months, with insiders investing in more than 7.76 million shares during this period. Generally, insiders buying more shares in their own firm sends a bullish signal. A research published in The MIT Press (1998) concluded 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 will be analysing whether these buying activities are supported by favourable future outlook and recent share price volatility. Check out our latest analysis for OZ Minerals
Which Insiders Are Buying?
Over the past three months, more shares have been bought than sold by OZ Minerals’s’ insiders. In total, individual insiders own over 1.01 million shares in the business, which makes up around 0.34% of total shares outstanding.
Is Future Growth Outlook As Bullish?
At first glance, analysts’ earnings expectations of -40.41% over the next three years illustrates poor outlook for the company, however, this is contrary to the signal company insiders are sending with their net buying activity. Delving deeper into the line items, OZ Minerals is believed to experience a limited level of revenue growth next year, which impacts its earnings expectation resulting in a negative growth rate of -11.36%. Without proper cost controls, earnings could continue to exhibit negative growth which is unmaintainable. However, insiders may view this as the time of investment and growth given their bullish increase in holdings. Or else they may simply believe the stock is below its intrinsic value, giving them motivation to buy now.
Can Share Price Volatility Explain The Buy?
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. In the past three months, OZ Minerals’s share price reached a high of A$10.67 and a low of A$8.85. This suggests some volatility with a share price change of of 20.56%. This may not be large enough to warrant any significant purchases, therefore the underlying driver may be the insiders’ belief of company growth prospects or simply their personal portfolio rebalancing.
Next Steps:
OZ Minerals’s net buying tells us the stock is in favour with some insiders, though negative growth in expected earnings contests this assumption, and the share price movement may be too trivial to cash in on any mispricing. 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 fundamental factors you should look at:
Financial Health: Does OZ Minerals 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 OZ Minerals? 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 pass 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.
