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Bombardier Inc., together with its subsidiaries, manufactures and sells transportation equipment worldwide. Bombardier’s insiders have invested 100,000 shares in the within the past three months. A well-known argument is that insiders investing more in their own companies’ shares sends an optimistic 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. I’ve analysed two possible reasons driving the insiders’ decision to ramp up their investment of late.
See our latest analysis for Bombardier
Who Are Ramping Up Their Shares?
Over the past three months, more shares have been bought than sold by Bombardier’s’ insiders. In total, individual insiders own over 272 million shares in the business, which makes up around 11.51% of total shares outstanding. The insider that recently bought more shares is Douglas Oberhelman .
Is Future Growth Outlook As Bullish?
Analysts’ expectations for revenue growth over the next 3 years of 41.78% provides a satisfactory outlook for the company which is consistent with the signal company insiders are sending with their net buying activity. Probing further into annual growth rates,Bombardier is believed to experience a rather subdued top-line growth over the next year, Insiders that believe the company could continue to deliver growth may have the incentive to increase their holdings.
Did Insiders Buy On Share Price Volatility?
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, Bombardier’s share price traded at a high of CA$4.09 and a low of CA$2.83. This suggests a fairly large volatility with a share price movement of 44.52%. This movement could potentially be significant enough to warrant insiders to accrue their shares.
Next Steps:
Bombardier’s insider meaningful buying activity tells us the shares are currently in favour, which is relatively consistent with expected earnings growth, and a fairly high volatility in share price 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 relevant aspects you should look at: