Eurotech SpA engages in the research, development, production, and marketing of miniaturized computers and high-performance computers featuring high computing capacity in Italy and internationally. Eurotech is one of Italy’s small-cap stocks that saw some insider buying over the past three months, with insiders investing in 223,859 shares during this period. 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, 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.
Check out our latest analysis for Eurotech
Who Are Ramping Up Their Shares?
There were more Eurotech insiders that have bought shares than those that have sold. In total, individual insiders own over 5 million shares in the business, which makes up around 13.46% of total shares outstanding. The insider that recently bought more shares is Dino Paladin (board member) .
Is Future Growth Outlook As Bullish?
At first sight, Eurotech’s future looks good. Digging deeper into the line items,analysts anticipate a healthy double-digit top-line growth next year, which Insiders expecting earnings improvement may increase their holdings in the company now when the market has not fully accounted for the growth potential.
Did Stock Price Volatility Instigate Buying?
Another factor we should consider is whether the timing of these insider transactions coincide with any significant share price movements. 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, Eurotech’s share price reached a high of €1.65 and a low of €1.32. This suggests some volatility with a share price change of of 25.53%. This may not be large enough to warrant any significant purchases, therefore the underlying driver may be the insiders’ belief of company growth prospects or simply their personal portfolio rebalancing.
Next Steps:
Eurotech’s insider meaningful buying activity tells us the shares are currently in favour, which is relatively consistent with expected earnings growth, although the share price has not moved significantly to warrant reassessment of 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 aspects you should further examine: