If a CEO is buying a substantial amount of company stock, 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 NerdWallet Inc (NRDS:US). NerdWallet is a personal finance company. Its main offering is an online platform that empowers consumers and small businesses to make financial decisions with confidence. The company is listed on the Nasdaq and currently has a market cap of $825 million.
Insider buying at NerdWallet
Our data shows that between August 9 and August 11, NerdWallet’s Co-Founder, CEO, and Chairman Tim Chen bought 40,000 shares at an average price of $9.66 per share. This trading activity cost the insider around $386,000 and increased his holding to 399,507 shares.
Mr. Chen has considerable company experience. In 2009, he co-founded NerdWallet along with Jake Gibson, and has served as CEO since then. In September 2021, he was also appointed Chairman.
He also has experience in the investment world. Prior to founding NerdWallet, he worked at JAT Capital Management, L.P. and Perry Capital as an Investor and at Credit Suisse as an Equity Research Associate.
Given his background and experience, he is likely to have a very good understanding of NerdWallet and its investment potential. What stands out here is that the insider has invested a significant amount of money in company stock and increased the size of his total holding by 11%. This suggests that he is quite confident the stock is undervalued at present.
37% top-line growth
Like many other unprofitable growth companies, NerdWallet has seen its share price fall recently. Year to date, the stock is down about 30%.
However, recent Q2 results showed that the company continues to grow at a healthy rate. For the period, revenue came in at $125.2 million, up 37% year on year, with credit card revenue rising 82%. Meanwhile, adjusted EBITDA came in at $12.7 million versus -$10.8 million a year earlier. Encouragingly, the loss from operations shrank to $9.0 million from $22.7 million a year earlier.
“We had another strong quarter as we strategically invested in our trusted brand and product vision for long-term growth,” commented CFO Lauren StClair.
After the recent share price fall, the stock does not look particularly expensive. At present, the forward-looking price-to-sales ratio here is just 1.6.
In light of the Q2 results, and the low valuation, we see the insider buying here as a bullish indicator.