Yahoo Finance SSP Group plc’s (LON:SSPG) Insiders Just Sold Shares – Should You?
SSP Group plc operates food and beverage outlets. SSP Group’s insiders have divested from 325.30k shares in the large-cap stock within the past three months. A well-known argument is that insiders divesting from their own companies’ shares sends a pessimistic signal. A two-decade research published in The MIT Press (1998) showed that stocks following insider selling declined 2.7% relative to the market. But these signals may not be sufficient to gain confidence on whether to divest. Today we will evaluate whether these decisions are bolstered by analysts’ expectations of future growth as well as recent share price movements.
View our latest analysis for SSP Group
Which Insiders Are Selling?
There were more SSP Group insiders that have sold shares than those that have bought. In total, individual insiders own over 9.68 million shares in the business, which makes up around 2.11% of total shares outstanding. The following insiders have recently reduced their company holdings: Chris Rayner (management) , Robert John Barton (management) and Simon Smith (board member) .
Does Selling Activity Reflect Future Growth?
On the surface, analysts’ earnings growth projection of 26.52% over the next three years provides a good outlook for the company. However this is inconsistent with the signal company insiders are sending with their net selling activity. Probing further into annual growth rates, SSP Group is believed to experience a rather subdued top-line growth over the next year, but a strong double-digit earnings growth of 13.33%. This may mean the company has effectively managed costs in order to pump up earnings growth. However, insiders may recognise this is not a sustainable practice and this negative sentiment is evidenced by their net selling activity. Or they may simply view the current share price is well-above the intrinsic value, providing a prime time to sell.
Did Stock Price Volatility Instigate Selling?
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. SSP Group’s shares ranged between £7.03 and £6.27 over the past three months. This indicates an immaterial change in share price, with a movement of 12.15%. Potentially, insider transactions are not share price related but may be due to their belief on what will happen to the company in the future or simply just personal cash and diversification needs.
Next Steps:
SSP Group’s net selling activity tells us the stock has fallen out of favour with some insiders as of late, though the positive growth in expected earnings tells us a different story, and the share price has not moved significantly to warrant reassessment of 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 relevant aspects you should further research:
Financial Health: Does SSP 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.
Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of SSP 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.
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.
