CFO purchases can be extremely informative insider transactions. CFOs have considerable insights into their firms’ financial health, and some studies have found that these insiders earn higher profits following their purchases of company shares than CEOs.
Here, we are going to highlight a CFO purchase at Abcam PLC (ABC:LN). Abcam is a UK-based global life science company that provides scientists with products that enable them to conduct life science research efficiently. It’s traded on the London Stock Exchange’s AIM market and currently has a market capitalization of £3.3 billion.
Abcam PLC: Insider Buying
Our insider transaction data shows that on March 16, the CFO of Abcam, Michael Baldock, purchased 5,910 ABC ADRs at a price of $17.00 per share. This purchase cost the insider around $100,000 and increased his holding in the ADRs by just under 60%.
This insider buying interests us for two reasons.
Firstly, Mr. Baldock worked in the investment banking sector for over thirty years. Whilst at HSBC, he ran the global healthcare sector team as well as the investment banking division in the Americas. He also helped form Bentley Health Care Inc between 1998 and 2000, and in 2008 he co-founded Ondra Partners, an independent financial advisory firm. This employment background means he is well placed to make investment decisions, especially within the healthcare sector.
Secondly, the CFO has chosen to increase his holding by 60%, which suggests that he is confident that the market is undervaluing the shares. Our data shows that this is his first trade since he made an initial purchase of ABC ADRs soon after he joined the company, which further suggests he believes the weakness in the share price over the last six months has been unwarranted.
Abcam’s recent full-year 2021 results showed that the group is making a good recovery from the pandemic, and is on target with its long-term strategy.
For the year, revenue amounted to £315.4 million, up 22% at constant exchange rates versus the calendar year prior. Meanwhile, statutory reported operating profit moved up to £7.1 million from £1 million in the previous year. Encouragingly, adjusted gross margin for the year jumped by 200 basis points to 72.2% as the group benefited from the contribution of higher-margin in-house products.
On the back of these results, the group raised revenue expectations for calendar year 2024 by £25 million to a range of £450 million to £525 million.
“We have had another successful year operationally and financially despite the ongoing challenges. As we look ahead to 2022, we expect to create more innovation and success out of the past two years of investment as we installed elements of Abcam's long term growth strategy. The scientific community remains our guide and with their support we are becoming a more influential and trusted brand globally," said Alan Hirzel, Abcam’s Chief Executive Officer.
Having read through these encouraging results and positive outlook for the long-term, we view the recent insider purchase of company shares by the CFO of Abcam as bullish. It is likely that the CFO was encouraged by the positive set of figures Abcam recently produced and has taken advantage of the weakness in the share price which he feels should be higher.