Insiders tend to be value investors. If they’re buying company stock, it’s usually because they believe that the market is undervaluing their business.
In this report, we are going to highlight some interesting insider buying at Renewi PLC (RWI:LN). Renewi is a leading waste-to-product company. Its goal is to extract value from waste and supply high-quality secondary raw materials. The company is listed on the London Stock Exchange and the Euronext Amsterdam and currently has a market cap of approximately £421.31 million.
Insider Buying at Renewi
2iQ’s insider transaction data shows that on May 26, Renewi’s CFO Annemieke den Otter purchased 22,000 shares at a price of €6.58 per share. This trade cost the insider approximately €145,000 and increased her holding to 57,432 shares.
This trading activity is notable for several reasons.
Firstly, the trade has increased the size of the CFO’s holding by around 62%. The fact that the insider – who previously worked at Macquarie Capital Advisors and ING – has boosted her stake by such a large percentage suggests that she is confident the stock is set to move higher.
Secondly, our data shows that this purchase represents the largest purchase from an insider at Renewi for over nine years.
Looking at Renewi’s current valuation, there certainly appears to be some value on offer here right now.
At present, analysts expect the company to generate earnings per share of 86 euro cents for the year ending March 31, 2024. At the company’s current share price, that gives Renewi a forward-looking P/E ratio of just seven – around half the UK market average.
One thing that could potentially provide a catalyst for a re-rating in the valuation is a higher level of growth. In its recent full-year results, Renewi said that its ambition is to accelerate revenue growth and that it is targeting €3 billion in five years at high-single-digit margins as a minimum. Growth will be achieved through market share gains, acquisitions, and higher levels of efficiency.
Another factor that could drive the stock up is the return of dividends. Renewi has not paid a dividend to its investors for several years now. However, in the company’s recent full-year results, it said that it is expecting to recommence dividends this financial year while simultaneously investing capital in its core businesses and making further acquisitions to drive growth.
In light of the low valuation here, we see the insider buying as a bullish development.