Research suggests that company insiders at firms with a small market cap are more likely to earn greater profits on their share purchases than their counterparts at large firms. This is because bigger companies have more research hours focused on them and their share prices tend to be more efficiently priced.
Here, we are going to highlight an insider purchase at a small Danish company, Flugger Group A/S (FLUGB:DC). Flugger Group is a home improvement company that designs and manufactures products such as decorative paints, wood protection products, wallpaper and tools. Operating in Scandinavia, Eastern Europe, and China, it sells its products through approximately 400 stores as well as online. It’s listed on the Copenhagen Stock Exchange and currently has a market capitalization of DKK 2.2 billion.
Flugger Group A/S: Insider Buying
Regulatory filings show that on 28 June, the Independent Chairman of the Board, Michael Mortensen, purchased 44,973 FLUGB shares at a price of DKK 739.79 per share. This purchase cost him approximately DKK 33.27 million (approx. USD $5.3 million) and increased his holding by 5%.
This trade caught our attention for a couple of reasons. Firstly, it is large in monetary terms which would suggest that Mortensen is very confident that the shares will continue to move in an upward trajectory.
Secondly, the insider has a good depth of experience within the industry which means he is likely to know Flugger’s market well. Mortensen joined the Board of Directors at Flugger in 2015. Previously, he founded property development company Casa A/S in 2006 and is currently its Chairman. Our data shows that he bought 500,000 shares in January at a price 15% below current levels. This suggests he is adept at picking his trading levels well.
Flugger experienced a stellar full-year 20-21 with the results showing a significant uplift in earnings and revenue when compared with the previous year. EBIT came in at DKK 228 million which was a 174% increase on the prior year and revenue was up by 14%. EBIT margin was a very respectable 10.6%. The 60% purchase of Unicell in November 2019 started to pay dividends, with the group growing revenue by more than 9%.
As a result of this strong performance, the group raised its long/term targets significantly. It is now expecting to hit revenue of DKK 3.5 billion and an EBIT margin of 10% in 2023/2024. Previously, the target was revenue of DKK 2.5 billion, with an EBIT margin of 8%. This will be achieved organically as well as through targeted acquisitions in Eastern Europe.
“We delivered solid results in all four quarters of the year, helped by the many renovation and painting projects our customers set to work on during COVID-19. We were also favored by the fact that both home sales and new construction have been at a high level. Last but not least. We’re reaping the rewards from our ongoing streamlining initiatives and a positive impact from the acquisition of Polish paint manufacturer Unicell,” said CEO Sune Schnack.
Given these strong results and the raised long-term guidance, we see the insider buying at Flugger as bullish. It signals that the insider believes there is further uplift in the share price to come.