Imperial Brands’ Chair Just Bought $500K Worth of Stock

There are two main reasons insiders invest in their own companies. They either believe that business is about to get better, or that the business is undervalued. Whatever the reason, insider buying tells us that those within the organization expect its share price to rise.

In this report, we are going to highlight a large insider purchase at Imperial Brands PLC (IMB:LN). Imperial Brands is a fast-moving consumer goods company with a tobacco heritage. The company owns a number of cigarette brands including Davidoff, West, and Winston, and also has exposure to next-generation products (NGP) such as vapor and heated tobacco products, and cannabis. The stock is listed on the London Stock Exchange and currently has a market cap of around £16.19 billion.

Large Purchase From Chair

Our data shows that on June 26, Imperial Brands’ Chair Therese Esperdy purchased 22,000 ADRs at a price of $22.86 per share. This trade cost the insider just over $500,000  and increased her holding to 59,787 ADRs.

Investment Banking Background

This trade is notable for several reasons.

Firstly, it has increased the size of Ms. Esperdy’s holding by nearly 60%. The fact that the insider has upped her stake by such a large percentage suggests that she sees a lot of value in the stock at present.

Secondly, Ms. Esperdy has a background in investment banking. Previously, she worked at JP Morgan in a number of top-level roles including Global Chair of JP Morgan’s Financial Institutions Group, Co-Head of Asia-Pacific Corporate & Investment Banking, Global Head of Debt Capital Markets, and Head of US Debt Capital Markets. Given her background, she is likely to have a good understanding of the investment potential here. 

Low Valuation

Imperial Brands shares certainly appear to offer value right now. At present, the consensus earnings forecast for the year ending September 30, 2023 is £2.83 per share. At today’s share price, that translates to a forward-looking P/E ratio of just 6.1 – less than half the average P/E ratio across the FTSE 100 index.

The low valuation isn’t the only attraction of the stock, however. There’s also a huge dividend yield on offer. Currently, analysts expect Imperial to pay out 146p per share in dividends this financial year, which equates to a yield of around 8.3% right now.

It’s worth noting that in May, Imperial Brands reported a rise in profit for the six-month period to March 31, 2023. For the half year, operating profit came in at £1.53 billion, up from £1.2 billion a year earlier. Looking ahead, the group said that it remains on track to deliver an acceleration in adjusted operating profit growth in H2 in line with its guidance and expectations.

In light of the low valuation here, we see the insider buying as a bullish development.