If a CFO is buying shares in their own company, it can pay to take a closer look. CFOs tend to have a thorough understanding of their companies’ operating and financial activities and some studies have found that these insiders earn larger profits following their purchases of company shares than CEOs.
In this report, we are going to highlight a large CFO purchase at CapStar Financial Holdings Inc (CSTR:US). CapStar Financial Holdings is the holding company of CapStar Bank – a Nashville-based bank that offers a range of financial services including business banking, personal banking, and wealth management. The company is listed on the NASDAQ Global Select Market and currently has a market capitalization of $464 million.
CapStar Financial: Insider Buying
Our data shows that on 14 June, CapStar CFO Denis Duncan bought 9,640 shares at a price of $21.13 per share. This purchase – which cost the insider approximately $204,000 – increased his holding to 54,440 shares from 44,800 shares.
Insider Trading Skill
This trade is worth highlighting due to the fact that Mr. Duncan has made a number of well-timed purchases recently. In April, for example, he purchased 20,000 shares at a price of $18.98 per share. Since then, the stock has risen as high as $23 – a gain of more 20%. He also bought CSTR stock in December and November last year at much lower levels.
This recent purchase is substantial both in nominal terms and relative terms. Our records show that it has increased the size of the insider’s holding by 21.5%. This suggests that Mr. Duncan is confident that the stock is set to continue moving higher. Our Insider Model views this recent purchase as bullish.
Value On Offer
CapStar Financial shares have experienced a pullback recently. After rising from $15 at the beginning of the year to $23 in early June, the stock has pulled back to $21. At that price, the stock’s forward-looking price-to-earnings (P/E) ratio is just 10.3. It seems that Mr. Duncan sees considerable value at that level.
It’s worth noting that CapStar recently advised that it had begun the year strongly. Net income in the first quarter was $11.0 million, up from net income of $1.3 million in the first quarter of 2020. On the back of this strong performance, the company raised its quarterly dividend by 20% to $0.06 per share, reflecting the Board of Directors’ confidence in the company’s near-term and long-term strategy.
In light of this dividend increase, we see the insider buying here as bullish. The large purchase from the CFO suggests that the stock could have further upside.