Top-level corporate executives and directors tend to have a high level of information in relation to their companies. If these insiders are buying company stock, it can be a sign that either business performance is improving, or that the stock is undervalued.
In this report, we are going to flag a large insider purchase at Coloplast A/S (COLOB:DC). Coloplast is a Danish healthcare company that develops and manufactures medical devices and products related to ostomy, urology, continence, and wound care. It is listed on the OMX Nordic Exchange - Copenhagen and currently has a market capitalization of DKK 187 billion.
Coloplast: insider buying
An insider transaction that looks interesting here is a large purchase from Danish billionaire Niels Peter Louis-Hansen, who is Deputy Chairman at Coloplast. Our records show that on 3 November, Louis-Hansen purchased 16,150 Coloplast shares at a price of DKK 928.25 per share. The total cost of the purchase was roughly DKK 15 million (approx $2.4 million).
Source: 2iQ Research
This purchase is significant for a few reasons. Firstly, Louis-Hansen is a top-level insider. Coloplast was founded by his father in 1957 and Louis-Hansen has been a board member since 1968. Through decades of board work, he has gained an in-depth knowledge of the industries in which Coloplast operates as well as deep insight into strategy development. Currently, the insider owns around 20% of the company.
Secondly, Louis-Hansen’s last few purchases have been timed well. Late last year, the insider purchased stock when it was trading near the DKK 770 level. Since then, it has risen approximately 25%.
Solid full-year results
Coloplast posted a solid set of full-year results earlier this month. For the year ended 30 September, revenue was up 3% while net profit was up 8%. The company lifted its dividend to DKK 18 from DKK 17 – an increase of 6%.
Looking ahead, Coloplast said that long-term underlying market growth is not expected to be impacted by Covid-19 and is unchanged at 4% to 5%. It also advised that it expects 7% to 8% organic growth in 2020/21.
In light of these solid results, we see the insider buying here as a bullish signal. It indicates that a top insider sees the stock as undervalued at present.