Yahoo Movies Myers Industries Inc’s (NYSE:MYE) Insiders Have Sold Shares – Should You?
Myers Industries, Inc. manufactures and sells polymer products for industrial, agricultural, automotive, commercial, and consumer markets worldwide. Myers Industries’s insiders have divested from 318.04k shares in the small-cap stock within the past three months. It is widely considered that insider selling stock in their own companies is potentially a bearish signal. A two-decade research published in The MIT Press (1998) showed that stocks following insider selling declined 2.7% relative to the market. However, these signals may not be enough to gain conviction on whether to divest. I’ve assessed two potential reasons behind the insiders’ latest motivation to sell their shares.
See our latest analysis for Myers Industries
Which Insiders Are Selling?
Over the past three months, more shares have been sold than bought by Myers Industries’s insiders. In total, individual insiders own over 1.68 million shares in the business, which makes up around 4.77% of total shares outstanding.
. Entities that sold on the open market in the last three months were GAMCO Investors, Inc. and Teton Advisors, Inc. Although these are institutional investors, rather than company executives or board members, the insights these investors gain from direct access to management as large investors would make them better-informed than the average retail investor. In this specific instance, I would classify these investors as company insiders.
Is Future Growth Outlook As Bearish?
At first glance, Myers Industries’s future looks muted.
Delving deeper into the line items, Myers Industries is believed to experience a limited level of revenue growth next year, although a significantly greater rate of earnings growth. Usually this discrepancy can be explained by an equally significant drop in costs.
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?
Another factor we should consider is whether the timing of these insider transactions coincide with any significant share price movements. This means, if insiders believe shares were heavily undervalued recently, this would provide a prime opportunity to buy more irrespective of its growth outlook.
Myers Industries’s shares ranged between $25.45 and $17.9 over the past three months. This suggests reasonably high share price volatility with a change of 42.18%.
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:
Myers Industries’s insiders’ meaningful divestments tells us that their shares have recently fallen out of favour, though the positive growth in expected earnings tells us a different story, but the relatively large share price volatility could explain the trade. 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. 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 relevant factors you should look at:
Financial Health: Does Myers Industries 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 Myers Industries? 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.
