If a CEO is buying shares in their own company, it’s often worth taking a closer look. CEOs tend to be way ahead of analysts and portfolio managers when it comes to the performance of their companies and their stock purchases can provide valuable trading signals.
In this report, we are going to highlight a large CEO purchase at Spirax-Sarco Engineering PLC (SPX:LN). Spirax-Sarco is an industrial engineering company that’s focused on thermal energy management. The company, which operates in over 130 countries worldwide, provides a diverse range of industrial customers with vital products, services, and engineered solutions to maximize efficiency and overcome their process challenges. It is listed on the London Stock Exchange and currently has a market capitalization of £7.7 billion.
Director dealing at Spirax-Sarco Engineering
Our data shows that on October 3, CEO Nicholas Anderson purchased 1,000 shares at a price of £102.39 per share. This trade cost the insider £102,390 and increased his holding to 60,125 shares.
Mr. Anderson is likely to have a good understanding of Spirax-Sarco’s prospects. Not only does he have considerable experience at the company – he joined the group in 2011 and has served as CEO since January 2014 – but he also has substantial industry experience.
It’s worth noting that Mr. Anderson is not the only insider to make a large stock purchase here recently. Our records show that since mid-June, two other board members have invested more than £100,000 in company stock. This tells us that insiders agree that the stock offers value right now.
10% dividend increase
Spirax-Sarco’s H1 results, posted in August, were impressive given the economic backdrop.
For the period, revenues were up 17% (15% organic growth) to £750.1 million, driven by volume growth and price increases. Meanwhile, adjusted operating profit was up 9% on an organic basis to £178.8 million. Earnings per share were 175.1p, up 11% year on year.
The group noted that global supply chain disruption is being managed and that its order books remain at record levels. It added that it expects full year adjusted operating profit margin in 2022 to be similar to the first half (23.8%).
On the back of these results, the company lifted its interim dividend 10% to 42.5p.
“We continue to be confident in our Group's resilience and ability to navigate the current uncertain macroeconomic climate. This is underpinned by our robust business model, our proven price management practices to offset inflation, record order books, ramp-up of our manufacturing capacity to meet customer needs and our ongoing mitigation of disruption caused by the global supply chain and Covid-19 impacts on our workforce,” wrote the company in the H1 results.
In light of these solid results, and the dividend increase, we see the insider buying here as a bullish indicator.