Hallmark Financial Services Inc

NASDAQ:HALL

Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.

Peter Lynch

It isn't a coincidence that corporate executives seem to always buy at the right times. After all, they have access to every bit of company information you could ever want. However, the fact that company executives have unique insights doesn't mean that individual investors are always left in the dark. Insider trading data is out there for all who want to use it.

Price return decomposition is a method of analyzing the factors that contribute to the changes in the market capitalization of a company.

The price return decomposition breaks down the market cap return into two main components: the change in the price-to-earnings (P/E) multiple and the change in company earnings (as well as the change in revenue and net margin).

The change in the P/E multiple reflects the effect of changes in investor expectations and sentiment towards the company. A higher P/E multiple means that investors are willing to pay more for each dollar of earnings, indicating higher expectations for future growth. Conversely, a lower P/E multiple indicates lower expectations.

The change in earnings, on the other hand, represents the actual changes in the company's earnings over the given period.

The change in revenue and net margin are two other factors that can impact a company's market cap. An increase in revenue indicates that the company is generating more sales, while an improvement in net margin indicates that the company is becoming more efficient and generating more profit from each dollar of sales.