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Huadian Power International Corporation Limited, together with its subsidiaries, engages in the generation and supply of electricity and heat to power grid companies in the People’s Republic of China. Huadian Power International’s insiders have invested more than 57.8 million shares in the large-cap stocks within the past three months. Generally, insiders buying more shares in their own firm sends a bullish signal. The MIT Press (1998) published an article showing 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. Today we will evaluate whether these decisions are bolstered by analysts’ expectations of future growth as well as recent share price movements. Check out our latest analysis for Huadian Power International
Who Are Ramping Up Their Shares?
More shares have been bought than sold by Huadian Power International insiders in the past three months. In total, individual insiders own less than one million shares in the business, or around 0.00010% of total shares outstanding.
Is This Consistent With Future Growth?
Analysts’ expectations for earnings over the next 3 years of 227.10% provides a fantastic outlook for the business which is consistent with the signal company insiders are sending with their net buying activity. Digging deeper into the line items, Huadian Power International is expected to experience negative growth in its top-line over the next year, which indicates the company may be facing some headwinds. However, next year’s earnings are expected to exhibit significant double-digit 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 conviction in the company’s capacity to keep growing. They may see it in the midst of a turnaround or simply deem the stock undervalued, 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. A correlation could mean directors are trading on market inefficiencies based on their belief of the company’s intrinsic value. Huadian Power International’s shares ranged between HK$3.64 and HK$2.81 over the past three months. This indicates some volatility with a share price change of of 29.54%. 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.