We recently published a list of 12 Penny Stocks with Insider Buying in 2025. In this article, we are going to take a look at where ModivCare Inc. (NASDAQ:MODV) stands against other penny stocks with insider buying in 2025.
Insider trading can be a reliable signal for gauging the degree of confidence that management has in the future of their company. This practice has been supported for decades by leading investors and analysts, who claim that there is only one reason for insiders to buy shares of their own companies – if they strongly believe the share prices are going to rise significantly. We discussed the theory behind insider buying in one of our recent articles named 10 Large-Cap Stocks with Insider Buying in 2025.
Insider buying can be an even more significant signal in the case of penny stocks, which are usually small- or micro-cap companies, because these stocks are often underfollowed or not followed at all, leading to significant price inefficiencies and overreactions from investors. This, in turn, may create pockets of opportunity that insiders exploit by leveraging their confidential information and visibility. Furthermore, given the smaller market cap, insiders can exert significant upward pressure on the stock price, which may help boost morale among shareholders.
READ ALSO: 10 Technology Stocks with Insider Buying in 2024
Empirical studies suggest that small caps tend to underperform relative to large caps during tough economic conditions, such as slowing GDP growth, inflation, high interest rates, and other exogenous pressures. Many believe that the US has already entered a new regime, called “Trump 2.0,” which will be dominated by higher inflation, lower economic support from government spending, and reduced availability of cheap labor, among several other possible challenges. Some surveys have hinted at a deteriorating business outlook among small- and mid-sized businesses, marked by lower CapEx budgets. Yardeni Research charts show that small-cap forward earnings have lagged significantly behind large caps since 2023. On top of that, the new economic regime in the US could further exacerbate these discrepancies and lead to greater relative underperformance of small caps, including penny stocks.
While the aforementioned developments could be bad for existing penny stock investors, they could also create investment opportunities for new investors. As the US broad market is still trading near its all-time highs, it has become increasingly difficult to find undervalued or even fairly valued large- and mid-cap companies. In such an environment, investors seeking higher returns may turn to smaller, lesser-known stocks with strong growth potential. The key takeaway for investors is that penny stocks could offer much more attractive, high-upside opportunities than large caps, and watching insider buying signals provides further reassurance regarding stock picking.
Our Methodology
We used Insider Monkey’s insider trading stock screener to find penny stocks trading under $5.00 share price with at least two insiders buying shares worth at least $100,000 in the last six months. We believe that multiple insiders buying significant amounts of stock represents a higher chance that insiders have high confidence in the company. For all the companies, we also include the number of hedge funds holding stakes in them, tracked by Insider Monkey as of Q4 2024. The stocks are ranked according to hedge fund positions.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
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ModivCare Inc. (NASDAQ:MODV)
Number of Hedge Fund Holders: 15
ModivCare Inc. (NASDAQ:MODV) is a technology-enabled healthcare services company offering integrated supportive care solutions to public and private payors and their patients. The company’s value-based services address social determinants of health, enhance access to care, reduce costs, and improve outcomes. MODV is a leading provider of non-emergency medical transportation, personal care services, and remote patient monitoring. Additionally, the company holds a minority equity interest in Matrix Medical Network, which collaborates with health plans and providers nationwide to deliver a broad array of assessment and care management services aimed at improving health outcomes and financial performance.
ModivCare Inc. (NASDAQ:MODV) showed strong Q3 2024 results, driven by improvements in Personal Care Services, higher margins in Remote Patient Monitoring, and NEMT cost savings. The company has made significant progress in optimizing technology, automating contact center functions, and reducing NEMT unit costs through a multimodal network strategy. During the quarter, the company successfully collected $105 million in gross contract receivables, including $42 million from retrospective prepayment resets and $39 million from an early settlement with their largest MCO client. The company is transitioning many of its shared risk contracts to fee-for-service arrangements, which is expected to normalize working capital and free cash flow over the next 2-3 quarters.
Looking ahead, ModivCare Inc. (NASDAQ:MODV) expects 2025 adjusted EBITDA to increase approximately 10%, driven by membership growth, new contract wins, cost savings, and other strategic initiatives. However, the company faces headwinds in the Medicare Advantage space, with expectations of business contraction in 2025 as clients adjust their supplemental benefit spending. The company’s transformation across all segments has created a foundation for stability with technology, clinical capabilities, and customer engagement differentiations at scale, positioning it for sustainable growth. The optimistic outlook for the future is strengthened by at least two insiders purchasing more than $100,000 worth of MODV stock in the last six months.
Overall, MODV ranks 4th on our list of penny stocks with insider buying in 2025. While we acknowledge the potential of MODV as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MODV but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
