Canadian Western Bank provides personal and business banking products and services primarily in Western Canada. Canadian Western Bank’s insiders have divested from 7.64k shares in the large-cap stock within the past three months. A well-known argument is that insiders divesting from their own companies’ shares sends a pessimistic signal. A research published in The MIT Press (1998) concluded that stocks following insider selling fell 2.7% compared to the market. But these signals may not be sufficient to gain confidence on whether to divest. Today we will evaluate whether these decisions are bolstered by analysts’ expectations of future growth as well as recent share price movements.
View our latest analysis for Canadian Western Bank
Who Are The Insiders?
There were more Canadian Western Bank insiders that have sold shares than those that have bought. In total, individual insiders own less than one million shares in the business, or around 0.68% of total shares outstanding. The following insiders have recently reduced their company holdings: J. Bowling and M. Eastwood .
Is This Consistent With Future Growth?
At first glance, analysts’ earnings expectations of 31.47% over the next three years illustrates a strong outlook going forward. But this is not consistent with the signal company insiders are sending with their net selling activity. Digging deeper into the line items, analysts anticipate a double-digit top-line growth over the next year, which appears to flow through to an earnings growth of 12.34%. Improved cost management and sustained high revenue growth could lead to higher earnings growth in the future. However, company insiders appear to know something the market doesn’t and have been divesting from the stock. This may mean they believe the strong growth is hard to maintain or that positive sentiment has led to an over-pricing of the stock price.
Did Stock Price Volatility Instigate Selling?
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. Canadian Western Bank’s shares ranged between CA$37.28 and CA$33.67 over the past three months. This suggests a trivial share price movement, with a change of 10.72%. This could indicate insider transactions are not driven by share price changes but perhaps they may simply want to diversify their holdings, distribute stock to investors, or simply require the cash for personal reasons.