Research shows that following insider buying in small-cap firms tends to be a more profitable strategy than following insider buying in larger firms. Smaller companies are less researched than larger companies, meaning that they offer greater potential for ‘surprises’ that can lead to outperformance.
In this report, we are going to highlight some interesting insider buying at a small US-listed company, CECO Environmental Corp (CECE:US). CECO Environmental is a leading environmentally focused industrial business. The company, which has operations in North America, Europe, and Asia, serves a broad landscape of industrial air, industrial water, and energy transition markets. It’s listed on the Nasdaq and currently has a market cap of $316 million.
Insider buying at CECO Environmental
Our data shows that between September 20 and September 21, board member David Liner purchased 15,000 CECE shares at an average price of $9.475 per share. This trade cost the insider approximately $142,000 and increased his holding to 115,080 shares.
Another board member purchase
This is not the only substantial purchase from an insider here recently. Our records show that on August 9, board member Richard Wallman picked up 20,000 shares at a price of $8.97 per share (total cost: $179,400), increasing his holding to 30,000 shares. This suggests that sentiment towards the stock within the boardroom is positive right now.
Full-year guidance raised
CECO Environmental recently posted a strong set of Q2 results.
For the period, revenue amounted to $105.4 million, up 34% year on year, while non-GAAP net income was $6.4 million, up 106% year on year. Orders were $113.5 million, up 33%.
At the end of the quarter, the group had a record backlog of $289 million.
"We delivered strong results in the second quarter and are pleased to share that we increased our backlog to new record levels while driving sales growth of more than 30% and EBITDA growth of more than 60%," commented CEO Todd Gleason.
On the back of this strong performance, the company raised its full-year guidance. It now expects $375 to $400 million in revenue (versus previous guidance of $360 million to $380 million) along with EBITDA of $37 million to $40 million (versus previous guidance of $33 million to $38 million).
"Our revised outlook reflects our continued confidence that we expect to deliver outstanding results through the year. We remain in excellent position to drive strong double-digit sales and income growth while also maintaining our focus on capital allocation," said Mr. Gleason.
In light of these results, we see the insider buying here as a bullish indicator.