A number of studies on insider buying have found that the most profitable insider transactions occur in small-cap firms. In this area of the market, stocks are less researched. This means there’s more potential for explosive share price gains.
In this report, we are going to flag some bullish insider buying in a German small-cap stock, 7C Solarparken (HRPK:GR). 7C Solarparken is a solar PV player with a focus on Germany. It is listed on the XETRA and currently has a market capitalization of €241 million.
7C Solarparken: insider buying
What’s caught our attention here is large purchases from the CEO and CFO of 7C Solarparken in the second half of October. Our records show that during this period CEO Steven De Proost purchased 217,400 shares while CFO Koen Boriau bought 217,500 shares. Combined, these insiders spent around €1.5 million on 7C Solarparken stock.
Source: 2iQ Research
First insider purchases since 2018
We see these insider transactions as bullish for several reasons. Firstly, insiders at 7C Solarparken don’t purchase stock very often. These are the first purchases since 2018.
Secondly, they are large purchases. De Proost’s purchase has increased the size of his holding by nearly 10%. Meanwhile Boriau’s purchase has increased the size of his holding by about 40%. Our Insider Model rates this insider activity as bullish.
Good H1 results
7C Solarparken posted a good set of first-half results in September. For the period, revenue was €26.7 million, up from €22.8 million in H1 2019. EBITDA increased from €21.5 million to €23.5 million due to increased sale of electricity. Management also raised its guidance for the full year. EBITDA for 2020 is now expected to be €39.2 million versus previous guidance of ‘at least €37 million.’
In light of this guidance upgrade, we see the insider buying here as a bullish signal. It suggests that management is confident about the future.