Research on insider transaction activity shows that insiders at small firms earn significantly greater profits from their stock purchases than insiders at large firms do. Smaller companies are less researched than larger companies, meaning that they are often less efficiently priced.
In this report, we are going to highlight an interesting insider purchase at a small German company, GK Software SE (GKS:US). GK Software is a technology company that provides comprehensive, state-of-the-art solutions – including consumer apps – for omni-channel retailing. Its client portfolio comprises numerous Tier 1 and Tier 2 retailers worldwide, including major international names such as Adidas, Hy-Vee, and Lidl. It is listed on Deutsche Börse’s Xetra and currently has a market cap of €270.5 million.
Insider buying at GK Software
Our data shows that on September 5, Supervisory Board member Herbert Zinn purchased 1,000 shares at a price of €121.49 per share. This trade cost the insider €121,490 and increased his holding to 3,000 shares.
What stands out here is that Mr. Zinn – who has been a member of the Supervisory Board for over a decade – has increased the size of his holding by around 50% with this trade. This suggests that he sees considerable value in the stock right now.
It’s also worth noting that this purchase represents the largest insider purchase at GK Software since April 2013.
Interesting opportunities in H2
GK Software continued its growth trajectory in the first half of 2022.
For the period, revenue came in at €75.1 million, up 17% year on year. Meanwhile, EBIT reached €11.3 million, up from €9.0 million the year before, with EBIT margin for H1 coming in at 15.0%, up from 14.0% in the first half of 2021. Performance was helped by growing sales in cloud contracts, strong business with customers, and a large contract win from Lidl.
Looking ahead, the company confirmed its forecast for 2022 as well as its medium-term forecast up to 2023. It also noted that it has “further interesting opportunities” in the pipeline for the second half of 2022, and that it expects to win more customers.
In light of these results, we see the insider buying here as a bullish indicator.