Western Energy Services Corp’s’ (TSE:WRG) is one of Canada’s small-cap stocks operating in the CA Energy Services industry. Western Energy Services saw some insider buying over the past three months, with insiders investing in 721,931 shares during this period. A well-known argument is that insiders investing more in their own companies’ shares sends an optimistic signal. The MIT Press (1998) published an article showing that stocks following insider buying outperformed the market by 4.5%. However, it may not be sufficient to base your investment decision merely on these signals. I’ve assessed two potential reasons behind the insiders’ latest motivation to buy more shares.
View our latest analysis for Western Energy Services
Who Are The Insiders?
Over the past three months, more shares have been bought than sold by Western Energy Services’s’ insiders. In total, individual insiders own over 6 million shares in the business, which makes up around 6.68% of total shares outstanding. Insiders that have recently ramped up their holdings are: and Alex MacAusland (management and board member) .
The entity that bought on the open market in the last three months was
Matco Investments Ltd.. 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?
On the surface, analysts’ earnings growth projection of 57.05% over the next three years 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,Western Energy Services is believed to experience a strong double-digit revenue growth next year, which appears to flow through to an earnings growth of 26.74%. High levels of sustained revenue growth as well as improved cost management could see higher levels of future earnings. Insiders’ conviction in this strong performance is illustrated by their ramp up in shareholdings. Or they may merely believe the stock is undervalued by the market relative to the growth potential it will deliver.
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. Western Energy Services’s shares ranged between CA$1.36 and CA$1.03 over the past three months. This indicates moderate volatility with a share price movement of 32.04%. 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.