Top-level corporate executives tend to have a high level of knowledge in relation to their companies. If these insiders are buying company stock, it can be a sign that financial performance is improving.
In this report, we are going to highlight some bullish insider buying at Elmos Semiconductor SE (ELG:GR). Elmos is a German company that develops semiconductors and sensors for use in the automotive industry. It is listed on Deutsche Börse's XETRA and currently has a market capitalization of €489 million.
Elmos Semiconductor: insider buying
Our records show that between 4 November and 11 November, three top-level insiders at Elmos Semiconductor bought stock. Those who purchased stock included:
- CFO Arne Schneider (10,000 shares)
- COO Guido Meyer (8,000 shares)
- Chief Sales Officer Jan Dienstuhl (1,100 shares)
Combined, these insiders spent around €420,000 on Elmos stock.
This insider buying activity is worth highlighting for a few reasons. Firstly, the fact that three insiders have purchased stock within a short period of time is a bullish signal as it shows there’s a consensus of opinion that the stock is undervalued. This pattern – which is called cluster buying – is one of the most powerful signals in insider transaction analysis.
Secondly, CFO Arne Schneider has a very high trading IQ. His long-term IQ is 115 while his short-term IQ is 118. This tells us his previous purchases have been timed very well.
It’s also worth pointing out that last time we observed insider buying here, in March this year, the stock rose 60% in the next four months.
Elmos Semiconductor recently published an encouraging set of third-quarter results in which sales came in at €40.9 million – the upper end of the guidance range of €37 to €41 million – and the group increased its full-year guidance. For the year, Elmos now expects sales of between €227 and €233 million and EBIT of between €6 and €9 million.
“As expected, the third quarter of 2020 was clearly a turning point. We are seeing significant recovery in our business with very strong sequential growth in the fourth quarter of 2020. Due to this noticeable improvement, the full-year guidance for 2020 is above market expectations,” said CEO Dr. Anton Mindl.
“Our intensive work on numerous new projects and our known strong product portfolio puts us in a confident mood when it comes to our medium- to long-term development,” Mindl added.
In light of this tone from management, we see the insider buying here as a bullish signal. It suggests that insiders see the stock as undervalued right now.