If a CEO is spending millions of dollars on company stock, investors should take note. 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 some CEO buying at Align Technology Inc (ALGN:US). Align Technology is a global medical device company that operates in the orthodontics space. The company is engaged in the design, manufacture, and marketing of Invisalign clear aligners, iTero intraoral scanners and services for dentistry, and exocad computer-aided design and computer-aided manufacturing (CAD/CAM) software for dental laboratories and dental practitioners. It is listed on the NASDAQ Global Select Market and currently has a market capitalization of $20.18 billion.
Align Technology Inc: Insider Buying
Our data shows that on May 4, President and CEO Joseph Hogan picked up 6,700 shares at a price of $298.48 per share. This trade cost the insider around $2.0 million and increased his holding to 174,801 shares.
What’s interesting about this insider transaction activity is that in the recent past, Mr. Hogan has been a heavy seller of stock. In August 2021, for example, he sold around $47 million worth of stock when it was trading near $700. Meanwhile, in October 2020, he offloaded about $37 million worth of stock when it was trading near $460.
The fact that the CEO – who joined the company in 2015 – has now become a buyer of stock is a notable development, in our view. It signals that after the recent share price decline, he now sees value on offer.
$200 Million Share Buyback
Align Technology’s share price fell in April after the company posted disappointing Q1 results.
For the period, revenue came in at $973 million, below the consensus forecast of $1.0 billion. Meanwhile, earnings per share of $2.13 missed the estimate of $2.22. The company also withdrew its 2022 revenue growth forecast of 20-30%, citing uncertainty driven by lockdowns in China, weaker consumer confidence, inflation, and the Russia-Ukraine conflict.
However, looking further out, management was confident in relation to the growth story.
“We know that Covid lockdowns, weaker consumer confidence, inflationary pressures, and the Russia/Ukraine conflict have created headwinds, but we remain excited and are committed to realizing the enormous opportunity in front of us to lead the evolution of digital orthodontics and comprehensive dentistry,” said Mr. Hogan. “No other company is as well positioned as us to take advantage of that potential as the environment improves and growth trends return. We remain confident in our long-term revenue growth target of 20-30%,” he added.
It’s worth noting that since the Q1 results, the company has announced a $200 million accelerated stock repurchase program. CFO John Morici said that the buyback reflected the strength of the balance sheet and cash flow generation, as well as management’s and the board's continued confidence in the group’s ability to capitalize on the large market opportunities.
In light of the confidence from management here, and the large share buyback, we see the insider buying as a bullish indicator.