If an insider has sold a large amount of stock, it can pay to approach that stock with caution. Insider sales can be a sign that the outlook for the company is deteriorating.
In this report, we are going to flag some interesting insider selling at Saras Spa (SRS:IM). Saras is an Italian energy company that operates refineries in Europe. Directly and through its subsidiaries, it sells and distributes oil products such as diesel, gasoline, heating oil, liquefied petroleum gas (LPG), and jet and bunker fuel. The company is listed on the Borsa Italiana and currently has a market capitalization of €634 million.
Saras: Insider Selling
Our records show that on 16 February, Saras CEO Dario Scafffardi sold 1.663 million shares at a price of €0.72 per share. This transaction generated proceeds of approximately €1.2 million.
This insider sale stands out because it has reduced Scafffardi’s holding to zero shares. In other words, he has sold his entire stake in the company. This suggests that the insider does not expect the stock to move higher. Our Insider Model views this trading activity as bearish.
It’s worth noting that Scafffardi has significant company experience. In October 2006, he was appointed General Manager and became a member of the Board of Directors. Since May 2018, he has been CEO of the company. This experience means he is likely to have a good understanding of the company’s recent performance and future prospects.
Saras’ most recent financial results, posted in November, showed that the company has been severely impacted by the coronavirus and the subsequent energy crisis.
For the nine-month period ended 30 September, revenue was €3,960 million, down 44% on the same period in 2019. Meanwhile, Reported Group EBITDA was (€78.1) million versus €258.3 million in the same period in 2019.
As a result of reduced margins, and the consequent reduced processing in the period, Saras said that it expects to achieve an average premium for 2020 above the EMC Benchmark margin of +2.1 $/bbl – lower than its previous guidance of 2.5 - 3.0 $/bbl.
In light of these results, and the fact that Saras could face challenges as the world focuses more on renewable energy, we see this insider sale as a bearish signal.