There are two main reasons why insiders invest in their own companies. They either believe business is about to get better, or that the company is undervalued.
Here, we are going to highlight a large insider purchase at Fiserv Inc (FISV:US). Fiserv provides financial services technology worldwide. It has a Payments and Industry Products segment and a Financial Institution Services segment. It also offers bank payment and liquidity management solutions, as well as internet-based mortgage software and mortgage lending technology solutions. It’s listed on the NASDAQ Stock Exchange and currently has a market capitalization of $75.8 billion.
Fiserv Inc: Insider Buying
Form 4 filings show that on 16 February the Chairman at Fiserv, Denis O’Leary, purchased 9,100 FISV shares at a price of $110.99 per share. This purchase – which cost the insider approximately $1.0 million – boosted his holding by around 14%.
Our data shows that this is the most significant insider purchase at Fiserv for over a year. Such a large transaction suggests that O’Leary is confident that the stock is set to move higher.
It’s also worth noting that O’Leary has extensive experience within the financial sector. He has been a Director at Fiserv since 2008 and he spent 25 years at J.P. Morgan Chase where he held senior positions, including Director of Finance. He is also a private investor which means he is likely to be well equipped to assess a company’s potential.
Fiserv’s recent Q4 results were solid. While Q4 revenue was down 2%, adjusted earnings per share were up 16% versus the prior year to $1.30 with free cash flow jumping 7% to $1.05 billion compared to the previous Q4. Adjusted operating margin jumped significantly compared to the year before, moving up to 35.6%, which was an increase of 420 basis points. The Directors approved a $60 million share buyback program.
The outlook statement was very positive. Fiserv expects internal revenue growth of 8% to 12% and adjusted earnings per share in a range of $5.30 to $5.50, representing growth of 20% to 24%, for 2021. This outlook assumes no significant extension of COVID-19 impacts beyond the first half of 2021.
COO Frank Bisignano commented: “We enter 2021 with good momentum from the strong sales activity of the past several quarters and a solid pipeline. “We expect that the strength of our business, together with a strong post-pandemic macro environment, will drive significantly improved financial performance in 2021.”
Given this news, we see the insider buying here as a bullish signal. It suggests that the Chairman feels that the shares are likely to rise in the near future.