Company executives and directors tend to have the most up-to-date information on their companies’ operating activities and future prospects. If these insiders are buying stock, it’s often a sign that business performance is strong and that the outlook for the stock is favorable.
In this report, we are going to highlight some insider buying at Evonik Industries AG (EVK:GR). Evonik is a German specialty chemicals company that operates in four main areas: nutrition and care, resource efficiency, performance materials, and services. It is active in more than 100 countries worldwide. The company is listed on Deutsche Börse’s Xetra and currently has a market capitalization of €13.2 billion.
Evonik Industries: Insider Buying
Our data shows that in June, two insiders at Evonik have purchased stock. On 4 June, Chairman of the Executive Board Christian Kullmann purchased 10,300 shares at a price of €29.29 per share, spending €302,000 on stock. Then, on 7 June, Executive Board member Thomas Wessel bought 3,500 shares at a price of €29.32, spending €103,000 on the stock.
Both of these insiders have made well-timed purchases in the recent past. In March last year, both bought stock when it was trading at around €20 (we said that these purchases were a bullish indicator at the time). Since then, the share price has risen to €28.
These recent purchases suggest that the insiders expect EVK stock to continue rising. It’s worth noting that Kullmann’s purchase has increased the size of his holding by 22% while Wessel’s purchase has increased the size of his position by 13%. These increases indicate that the insiders are confident that the stock is set to move higher.
Strong Start to 2021
Evonik’s first-quarter results showed that the company has made a strong start to the year. For the quarter, the company generated sales of €3.358 billion, up 4% year on year, along with adjusted EBITDA of €588 million, up 15% year on year and clearly above the 2019 pre-pandemic level. Free cash flow was €312 million, a record high for a first quarter.
"We posted the strongest first-quarter free cash flow since our stock market listing in 2013," said CFO Ute Wolf. "Our clear focus on growth in free cash flow is paying off."
As a result of this performance, the company upgraded its guidance for the year. For 2021, it now expects adjusted EBITDA of between €2.1 billion and €2.3 billion. Previously the bottom end of the forecast range was €2.0 billion.
"A really good start has made us more optimistic for the year as a whole," said Chairman Christian Kullmann. "As well as increasing earnings from last year, we even beat the pre-pandemic earnings from 2019. Our growth strategy is working.”
In light of these strong results and the confident tone from management, we see the insider buying here as bullish. It suggests that insiders expect the stock to keep rising.