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Everest Industries Limited provides roofing and flooring products and solutions for industrial, commercial, and residential applications in India. Everest Industries’s insiders have divested from 24.73k shares in the large-cap stock within the past three months. Generally, insiders selling shares in their own firm sends a bearish 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. I’ve analysed two possible reasons driving the insiders’ decision to reduce their investment of late.
Check out our latest analysis for Everest Industries
Who Are The Insiders?
More shares have been sold than bought by Everest Industries’s insiders in the past three months. In total, individual insiders own over 1.28 million shares in the business, which makes up around 8.22% of total shares outstanding. The following insiders have recently reduced their company holdings: Manish Sanghi (management) , Rahul Chopra (management and board member) and Yenduri Naga Srinivasa Rao (management and board member) .
Is Future Growth Outlook As Bearish?
At first sight, Everest Industries’s future looks muffled. Digging deeper into the line items, analysts anticipate a limited level of revenue growth next year, but a strong double-digit earnings growth of 27.40%. This may be due to effective cost reduction initiatives implemented by the company to drive higher earnings. However, insiders may recognise this is not a sustainable practice and this negative sentiment is evidenced by their net selling activity. Or they may simply view the current share price is well-above the intrinsic value, providing a prime time to sell.
Can Share Price Volatility Explain The Sell?
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. In the past three months, Everest Industries’s share price reached a high of ₹586.1 and a low of ₹387.8. This indicates reasonably high share price volatility with a change of 51.13%. Insiders may deem this relatively meaningful movement as an opportunity to decrease their shareholdings. Or perhaps their reason to sell is not driven by price or growth prospects and merely by their own personal diversification or monetary needs.
Next Steps:
Everest Industries’s net selling activity tells us the stock has fallen out of favour with some insiders as of late, however, this is rather cautious relative to analysts’ earnings expectation, whereas a highly volatile share price could be the driver to sell. But we must also be aware that insiders divesting may not actually be based their views on the company’s outlook. Moreover, while insider selling can be a useful prompt, following the lead of an insider, however, will never replace diligent research. I’ve put together two essential factors you should further examine: