FlexiGroup Limited provides consumer revolving financing, leasing, and rental financing services in Australia, New Zealand, and Ireland. FlexiGroup’s insiders have invested more than 1 million shares in the small-cap stocks within the past three months. It is widely considered that insider buying stock in their own companies is potentially a bullish signal. A research published in The MIT Press (1998) concluded 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.

See our latest analysis for FlexiGroup

Which Insiders Are Buying?

Over the past three months, more shares have been bought than sold by FlexiGroup’s’ insiders. In total, individual insiders own over 96 million shares in the business, which makes up around 25.65% of total shares outstanding. .

The entity that bought on the open market in the last three months was

Colonial First State Asset Management (Australia) Limited. 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?

At first sight, FlexiGroup’s future looks optimistic. Probing further into annual growth rates,analysts anticipate a sizeable revenue growth over the next year, which 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 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. Volatility provides an opportunity to trade on market inefficiencies when the stock is under-priced compared to the stock’s intrinsic value. FlexiGroup’s shares ranged between A$1.9 and A$1.53 over the past three months. This suggests some volatility with a share price change of of 23.86%. 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.

Next Steps:

FlexiGroup’s net buying tells us the stock is in favour with some insiders, which is fairly consistent with earnings growth expectations, even if the low share price volatility did not warrant exploiting any mispricing. However, 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 fundamental factors you should further examine: