Top-level insiders such as CEOs and CFOs tend to have a good understanding of their companies’ operating activities. If they’re buying company stock, it’s often a sign that the outlook for the business, and the share price, is attractive.
In this report, we are going to highlight a large CEO stock purchase at Gentex Corp (GNTX:US). Gentex is a technology company that develops advanced electronic products and features for the automotive, aerospace, and fire protection industries. It is listed on the Nasdaq and currently has a market cap of $6.04 billion.
Insider buying at Gentex
Our data shows that on October 31, Gentex President and CEO Steve Downing bought 10,000 GNTX shares at a price of $25.74 per share. This trade cost the insider $257,400 and increased his holding to 118,506 shares.
Mr. Downing has worked at Gentex for around 20 years, so he is likely to know the company very well. Before being appointed CEO in 2018, he served as CFO, COO, and Vice President of Commercial Management.
What stands out here is that Mr. Downing has made a large purchase after a period of share price weakness. This suggests that he sees value in the stock right now and that he expects it to rebound.
Margins to improve
Gentex’s Q3 results showed that the company is experiencing a number of challenges right now.
While sales for the quarter were up 24% year on year, the company said that product mix and overall sales levels were impacted by customer order adjustments, supply chain challenges, and labor availability issues. Together, these headwinds resulted in unit shipments being approximately 750,000 units lower than its forecast at the beginning of the quarter, which resulted in a significant revenue shortfall versus the beginning-of-quarter forecast.
Gross margin for the quarter came in at 29.8%, compared to 35.3% a year earlier, as a result of raw material cost increases, unfavorable product mix, labor cost increases, and prior commitments to annual customer price reductions.
However, the company said that it is confident in its ability to work through these issues and that it expects gross margins to improve going forward. It noted that it is making progress on cost escalation conversations with customers, and that it expects relief to begin during the fourth quarter of 2022, which should provide improvement in its margin profile in 2023 and into 2024.
“As the fourth quarter begins and we transition into 2023, we remain confident in our ability to grow the business and improve margins, while at the same time expanding our technology portfolio,” said Mr. Downing.
In light of this margin projection from management, we see the insider buying here as a bullish indicator.