Yahoo Finance Why Did Stingray Digital Group Inc’s’ (TSE:RAY.A) Insiders Buy Up More Shares?
Stingray Digital Group Inc. provides business-to-business multi-platform music, and in-store music and video solutions to businesses and individuals worldwide. Stingray Digital Group’s insiders have invested 557.25k 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 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 Stingray Digital Group
Which Insiders Are Buying?
More shares have been bought than sold by Stingray Digital Group insiders in the past three months. In total, individual insiders own over 2.42 million shares in the business, which makes up around 4.3% of total shares outstanding.
Is This Consistent With Future Growth?
At a very high level, Stingray Digital Group’s future looks very positive. Digging deeper into the line items, Stingray Digital Group is believed to experience a sizeable revenue growth over the next year, which is expected to drive significant expected earnings growth as well. This could indicate some degree of economies of scale which may have a compounding impact in the future. Insiders recognising these benefits as defensible may ramp up their holdings in the company. Or they may simply deem the company as undervalued by the market based on the growth potential it will deliver.
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. A correlation could mean directors are trading on market inefficiencies based on their belief of the company’s intrinsic value. Within the past three months, Stingray Digital Group’s share price traded at a high of CA$11 and a low of CA$8.55. This indicates some volatility with a share price change of of 28.65%. 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:
Stingray Digital Group’s insider meaningful buying activity tells us the shares are currently in favour, reinforced by the substantial 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 compiled two fundamental aspects you should look at:
Financial Health: Does Stingray Digital Group 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 Stingray Digital Group? 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 pass 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.
