Cleanaway Waste Management Limited provides waste management, recycling, and industrial services in Australia. Cleanaway Waste Management’s insiders have invested more than 123 million shares in the within the past three months. It is widely considered that insider buying stock in their own companies is potentially 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%. 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 Cleanaway Waste Management
Who Are Ramping Up Their Shares?
Over the past three months, more shares have been bought than sold by Cleanaway Waste Management’s’ insiders. In total, individual insiders own over 2 million shares in the business, which makes up around 0.07% of total shares outstanding. .
The entity that bought on the open market in the last three months was
FIL Limited Marathon Asset Management LLP MLC Investment Management Limited MLC Investments Limited Paradice Investment Management Pty Ltd. Vinva Investment Management. 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 53.68% provides an optimistic outlook going forward which is consistent with the signal company insiders are sending with their net buying activity. Probing further into annual growth rates,Cleanaway Waste Management is expected to experience a strong double-digit revenue growth next year, which seems to flow through somewhat to its earnings growth of 9.12%. Continued revenue growth combined with cost-efficiency initiatives could lead to even higher earnings growth going forward. If insiders anticipate an improvement in earnings, they may ramp up their shares now before the market has incorporate the full growth potential into the share price.
Did Stock Price Volatility Instigate Buying?
Alternatively, the timing of these insider transactions may have been driven by share price volatility. A correlation could mean directors are trading on market inefficiencies based on their belief of the company’s intrinsic value. In the past three months, Cleanaway Waste Management’s share price reached a high of A$1.6 and a low of A$1.36. This suggests some volatility with a share price change of of 18.08%. Insiders’ purchases may not be driven by this movement but perhaps their view of the company’s growth in the future or simply their individual portfolio rebalancing.