Insider buying can provide valuable trading signals. Insiders sell company stock for many reasons. But they only buy stock for one reason – they expect it to go up.
In this report, we are going to highlight some interesting legal insider trading activity at Kainos Group PLC (KNOS:LN). Kainos is a British company that specializes in digital transformation services. Operating in over 20 countries, it provides solutions related to cloud, automation, data, and artificial intelligence (AI). The company is listed on the London Stock Exchange and currently has a market capitalization of approximately £1.89 billion.
Insider Buying at Kainos
Our data shows that on December 20, Kainos board member Katie Davis purchased 6,400 shares at a price of £15.64 per share. This trade cost the insider approximately £100,000.
Digital Transformation Expert
Ms. Davis has considerable experience in the digital transformation space. In 2005, she joined the UK Cabinet Office, where she was responsible for delivering large-scale IT-enabled change within the public sector. She subsequently held a number of senior positions in the Cabinet Office, Home Office, Department of Health, and the NHS. In 2012, she was named as one of the 25 most influential women in IT by Computer Weekly.
What stands out here is that this is her first purchase of Kainos stock since she was appointed to the board in November 2019. This suggests that she believes the market is mispricing the stock at present.
Kainos’ recent half-year results showed that the company has a lot of momentum right now.
For the six months ended September 30, revenue amounted to £179.8 million, up 26% year on year. Meanwhile, adjusted diluted earnings per share came in at 22p, up 15% year on year.
At the end of the period, the contracted backlog was £307.9 million, up 23% year on year.
Looking ahead, management was optimistic in relation to future growth.
“Looking forward, we remain confident in our business as the demand for our services has never been higher, our reputation for delivery continues to flourish, while the scale and capability of our organization continues to grow at pace,” said CEO Brendan Mooney.
Since these results, analysts at Berenberg have upgraded the stock to ‘buy’ from ‘hold’ and raised their price target from £12.00 to £17.00.
In light of the strong momentum here, we see the insider trading case as a bullish indicator.