Research shows that following insider buying at smaller firms tends to be a more profitable strategy than following insider buying at larger firms. Small-cap stocks are less researched than large-cap stocks, meaning that they offer greater potential for ‘surprises’ that can lead to outperformance.
In this report, we are going to highlight some interesting insider buying at a small US company, Cantaloupe Inc (CTLP: US). Cantaloupe is a software and payments business that provides end-to-end technology solutions for the unattended retail market. Its customers include vending machine companies, gas and car charging stations, laundromats, metered parking terminals, kiosks, amusements, and more. The company is listed on the NASDAQ Global Select Market and currently has a market capitalization of $364 million.
Cantaloupe Inc: Insider Buying
Our insider transaction data shows that on May 23 and May 24, Cantaloupe’s COO Ravi Venkatesan purchased 45,001 shares at a price of $4.52 per share. This trade cost the insider $203,593 and increased his holding to 70,083 shares. and on May 24, board member Lisa Baird made a smaller purchase, picking up 10,000 shares at a price of $4.67 per share.
Additionally, Cantaloupe's active investor and 10% owner, Hudson Executive Capital LP also actively bought stock from May 23 to 25. In total, Hudson Executive purchased 143,460 shares, worth almost $649K. The value of these shares went from $4.5 to $4.83 per stock.
It was the large purchase from COO Ravi Venkatesan that caught our attention here. In buying 45,001 shares, the insider has increased his holding by 179%. This suggests he is very confident the stock is set to move higher.
Yet we also think it’s interesting that another insider bought stock the day after Mr. Venkatesan’s purchase. This tells us that the COO is not the only one who believes the stock has upside potential. It’s worth noting that our Insider Model sees this buying activity as bullish.
Cantaloupe recently posted a solid set of Q3 fiscal 2022 results.
For the period, total dollar volumes of transactions were $562 million, an increase of 36% year over year while revenue amounted to $50.3 million, an increase of 18% year over year.
Gross margin improved to 32.2% compared with 29.7% in the prior year period, while adjusted EBITDA improved to $3.7 million compared to $2.2 million in the prior year period, an increase of 68%.
At the end of the quarter, the group had 22,818 active customers, up 22% year on year.
“We are pleased to report another strong quarter, with 18% growth in revenue, primarily driven by a 31% increase in transaction fees, another record,” commented CEO Sean Feeney.
“The industry is poised to continue to grow due to strong secular tailwinds and innovation at the forefront of operator’s minds. Cantaloupe is well positioned with our portfolio of innovative products and customer support services to help operators, engage their customers, optimize their businesses and increase same store sales, now and in the future,” he added.
In light of these results, we see the insider buying here as a bullish indicator.