Yahoo Finance Did Hindustan Unilever Limited (NSE:HINDUNILVR) Insiders Sell Their Own Shares?
Hindustan Unilever Limited, a consumer goods company, manufactures and sells home and personal care, food, and refreshment products in India and internationally. Hindustan Unilever is one of India’s large-cap stocks that saw some insider selling over the past three months, with insiders divesting from 11.75k shares during this period. A well-known argument is that insiders divesting from their own companies’ shares sends a pessimistic signal. A two-decade research published in The MIT Press (1998) showed that stocks following insider selling declined 2.7% relative to the market. But these signals may not be sufficient to gain confidence on whether to divest. I’ve assessed two potential reasons behind the insiders’ latest motivation to sell their shares.
See our latest analysis for Hindustan Unilever
Who Are The Insiders?
Over the past three months, more shares have been sold than bought by Hindustan Unilever’s insiders. In total, individual insiders own over 1.11 million shares in the business, which makes up around 0.051% of total shares outstanding.
Insiders that have recently trimmed down their holdings are Aakriti Chandra and Harishankar Krishnan .
Is Future Growth Outlook As Bearish?
Analysts’ expectations for earnings over the next 3 years of 60.3% provides an upbeat outlook going forward. But this is not consistent with the signal company insiders are sending with their net selling activity.
Probing further into annual growth rates, Hindustan Unilever is expected to experience a rather subdued top-line growth over the next year, but a strong double-digit earnings growth of 19.3%. This may mean the company has effectively managed costs in order to pump up earnings growth.
This may not be seen as a maintainable practice by insiders, who may expect a decline in earnings to reflect lower revenues in the future. Or they may merely view the stock as overvalued by the market which provides a suitable time to sell.
Did Insiders Sell On Share Price Volatility?
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.
In the past three months, Hindustan Unilever’s share price reached a high of ₹1792.3 and a low of ₹1590.65. This suggests a relatively insignificant share price movement, with a small change of 12.68%.
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.
Next Steps:
Hindustan Unilever’s insiders’ meaningful divestments tells us that their shares have recently fallen out of favour, however, this is rather cautious relative to analysts’ earnings expectation, and the share price movement may be too trivial to cash in on any mispricing. However, it’s important to keep in mind, insider selling may not necessarily be based on their belief of the company’s ability to perform in the future. Furthermore, 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 important aspects you should further examine:
Financial Health: Does Hindustan Unilever have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of Hindustan Unilever? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
