There are two main reasons insiders invest in their own companies. They either believe that business is about to get better, or that the company is undervalued. Whatever the reason, insider buying tells us that those within the company expect the company’s share price to go up.
In this report, we are going to highlight some interesting insider buying at Encavis AG (ECV:GR). Encavis is a German renewable energy company that acquires and operates solar and wind parks across Europe. It is listed on Deutsche Börse’s Xetra and currently has a market capitalization of €2.4 billion.
Encavis AG: Insider Buying
Our records show that between 6 April and 21 April, two members of Encavis’ Supervisory Board purchased stock. Dr. Cornelius Liedtke purchased 243,744 shares, spending approximately €3.8 million on stock, while Albert Bull purchased 150,000 shares, spending about €2.5 million on the stock.
These are substantial, high-conviction purchases. We have seen insider trades at Encavis before. However, these purchases are much larger than other purchases we have observed in the recent past. Indeed, our data show that this buying activity represents the largest amount of insider buying at Encavis within a quarter for several years. The size of these purchases suggests that Liedtke and Bull are very confident the stock is undervalued at present and is set to move higher.
Share Price Weakness
Encavis delivered a solid performance in 2020, surpassing revenue and operating earnings forecasts. For the year, revenue increased by 7% to €292 million while operating EBITDA increased by around 3% to €225 million. Operating cash flow was €213 million, up 12.5% on the year before. As a result of this performance, the group lifted its dividend from €0.26 to €0.28.
Looking ahead, Encavis said that the 2021 year will benefit from the continuing expansion of the portfolio. This year, the company expects revenue of more than €320 million along with EBITDA of more than €240 million. Looking further out, the group believes it is well-positioned to achieve its long-term goals.
The market didn’t like this guidance and the stock fell as a result. The insider buying here suggests that those within the company view the share price pullback as a buying opportunity. We see this insider buying as a bullish signal.