Insider buying can provide valuable clues about a stock’s future direction. Insiders only buy stock for one reason – they expect it to go up.
In this report, we are going to flag some interesting insider buying at Ebro Foods SA (EBRO:SM). Ebro is a Spanish food company that produces rice, pasta, cereals, and organic foods. It is listed on the Madrid Stock Exchange and currently has a market capitalization of €3 billion.
Ebro Foods: insider buying
Our records show that between 26 November and 3 December, Ebro’s Vice Chairman Demetrio Carceller Arce purchased stock six times. In total, he purchased 60,000 shares, spending about €1.2 million on stock.
High insider IQ
This insider transaction activity stands out for two reasons. Firstly, Arce – who has been on the board for over a decade – has purchased a substantial amount of stock. His purchases have increased the size of his holding by 80%. This suggests that he is very confident that the stock is undervalued at present.
Secondly, Arce has a good track record when it comes to buying and selling Ebro Foods shares. Back in 2018, he purchased stock a number of times during periods of share price weakness. He then sold this stock around a year later at significantly higher prices.
Strong Q3 results
Ebro Foods posted a good set of third-quarter results in late October. For the period, turnover grew by 19.2% to €2,425.3 million, boosted by strong performance of its premium brands in rice and pasta. Meanwhile EBITDA-A rose to €327.1 million, 38% higher than the same period in 2019, and net profit was up 27.8% to €146.7 million.
Looking ahead, the company said that it expects full-year turnover to be €3,150 to €3,200 million. This would represent growth of 12% to 14% on turnover in 2019.
Putting this all together, we see the insider buying here as bullish. It suggests that the Vice Chairman is confident about the future and that he expects the stock to rise.