If a CEO is buying company stock, it can often send a strong positive signal out to potential investors. CEOs tend to play a fundamental role in driving company growth, and these insiders often pick up on financial trends well in advance of analysts and fund managers.
Here, we are going to highlight insider buying by the CEO at Atlas Copco AB (ATCOA:SS). Atlas Copco develops, manufactures, and markets industrial tools and equipment. Headquartered in Sweden, the company has customers in close to 200 countries. It’s listed on the Nasdaq Stockholm Stock Exchange and currently has a market capitalization of SEK 640.9 billion.
Atlas Copco AB: Insider Buying
Our insider transaction data shows that on January 28, the CEO at Atlas Copco AB, Mats Rahmstrom, purchased 2,500 ATCOA shares at a price of SEK 447.50. This purchase cost the insider SEK 1.12 million (about $120,000) and increased his holding by a little over 35%.
Intimate Knowledge of the Business
This insider buying is worth highlighting for two main reasons.
Firstly, Mr. Rahmstrom is likely to understand Atlas Copco very well. He was an internal appointment, so it is highly probable he understands the inner workings of the company. Previously, he performed a number of roles within Industrial Technique, a business segment within Atlas Copco.
Secondly, our insider transaction data shows this is the largest insider purchase of stock at the company for well over a year. This is also Mr. Rahmstrom’s biggest purchase of Atlas Copco shares since the end of 2018. This suggests that he is confident that the positive share price momentum will continue.
Strong Operating Profit
Atlas Copco produced an excellent set of Q4 figures for the period covering October to December 2021. The company improved its financial performance markedly compared to the year before.
Adjusted operating profit was SEK 6.462 billion which was up from SEK 5.402 billion a year prior. The margin improved from 21% to 21.9% and organic revenues grew 12% to SEK 29.533 billion. Basic EPS moved up to SEK 4.01 from 3.45 and return on capital employed was 27% versus 23% the year before. Net debt fell significantly to SEK 8.151 billion from SEK 16.421 billion.
“Atlas Copco expects that the customers’ business activity level will remain at the current high level,” said the company in the Q4 results.
It's worth noting that analysts at Kepler Cheuvreux were impressed with the results and upgraded the company to a buy from a hold, stating that they believe the near-term outlook is strong for Atlas Copco.
On the back of these very strong Q4 numbers and a confident outlook, we see the recent insider buying at Atlas Copco as bullish. It suggests that the CEO firmly believes his company’s shares will keep moving higher.