Insiders have access to real-time information on their companies and often also have experience that can help them evaluate their firms’ investment prospects. If they are buying company stock, it’s generally worth taking a closer look.
In this report, we are going to highlight some interesting insider buying at Coty Inc (COTY:US). Coty is an American beauty company that specializes in cosmetics, skin care, fragrance, and hair care. The company is the global leader in fragrance, the second largest company for hair color and styling products, and the third largest company for color cosmetics. It’s listed on the New York Stock Exchange and currently has a market capitalization of $6.45 billion.
Insider Buying at Coty
2iQ’s data shows that between November 10 and November 15, Coty board member Olivier Goudet purchased 300,000 Coty shares at an average price of $7.51 per share. This trading activity cost the insider roughly $2.25 million and increased his holding to 1.03 million shares.
Experienced Investor
Mr. Goudet is an experienced investor. Currently, he is Managing Partner and CEO at JAB – an investment company that focuses on the consumer goods space. He also has plenty of experience in the consumer goods industry himself. Previously, he was CFO at Mars. Given his background, he is likely to have a good understanding of Coty’s prospects and investment potential.
What stands out here is that the insider has increased the size of his holding by approximately 41%. This suggests that he is very bullish on the stock right now. Our Insider Model views this trading activity as positive.
Q1 Beat
Coty recently posted a solid set of Q1 fiscal 2023 results on the back of strong demand for its products.
For the period, net revenues were $1.39 billion, above analysts’ forecast of $1.37 billion. This represented growth of 1% year on year, however, on a like-for-like basis, revenue was up 9%.
Adjusted operating income increased 24% to $249.6 million, with a margin of 18.0% (+340 bps), while free cash flow was healthy at $88.2 million.
"Our strong Q1 results, in the midst of a complex external environment including ongoing component shortages, confirm the strength and resilience of Coty's brands, teams, strategy and operating model. This represents the ninth consecutive quarter of Coty reporting results in-line to ahead of expectations. The progress we continue to make should be evident across all key financial KPIs, from sales to gross margins and adjusted EBITDA to our deleveraging progress,” commented Sue Y. Nabi, Coty's CEO.
Looking ahead, Coty said that it expects modest gross margin expansion in both Q2 and FY2023, despite inflation. Additionally, it said that it expects its debt levels to come down significantly in the next few years. It is targeting a leverage ratio of 3x exiting FY2023 and 2x exiting FY2025 versus 4.5x now.
In light of these solid Q1 results, we see the insider buying here as a bullish indicator.
