Research on legal insider trading shows that insiders at smaller firms tend to earn the largest profits. Small companies are typically less researched than larger companies. As a result, they are often less efficiently priced.
In this report, we are going to highlight some insider buying in a US small-cap stock, GTY Technology Holdings (GTYH:US). GTY Technology is a software as a service (SaaS) company that offers solutions for the public sector in the areas of procurement, payments, grant management, budgeting, and permitting. It is listed on the NASDAQ Capital Market and currently has a market capitalization of $384 million.
GTY Technology Holdings: Insider Buying
Our records show that on 22 February, CEO TJ Parass bought 19,100 GTYH shares at a price of $6.95 per share. This transaction cost the insider $132,669. On the same day, Chairman and ex-CEO William Green bought 7,400 shares at a price of $6.82 per share. This transaction cost a total of $50,454.
This insider activity looks interesting for a couple of reasons. Firstly, Parass and Green are both top-level insiders. Green – who was previously CEO and Chairman of Accenture – founded the company in 2016, while Parass – who was previously CEO of Questica – became CEO in March 2020. It’s fair to assume that both insiders have a good understanding of the company’s recent performance and future prospects.
Secondly, Parass’ purchase has increased the size of his holding by 191%. This suggests he is confident the stock is set to move higher. Our Insider Model views this buying activity as bullish.
Taking Market Share
GTY posted a good set of fourth-quarter and full-year results in mid-February. Total non-GAAP revenue for Q4 was $13.2 million, up 10% compared to the fourth quarter of 2019, while non-GAAP operating loss for Q4 2020 was $(1.1) million, compared to an operating loss of $(5.4) million in the fourth quarter of 2019. For the year, non-GAAP revenue was $48.8 million, up 20% year on year. As of 31 December, the group had 1,768 customers, up 15% year on year.
Looking ahead, the company said that it is expecting total non-GAAP revenue growth of 10% in Q1 and 20% growth for the full 2021 year.
“Looking back on the year, we saw strong demand for our products as more and more public sector organizations are pushing to modernize and transform their operations. The fact that they are investing in our technology while dealing with budget shortfalls amid their pandemic response shows the mission critical nature of our software,” commented Mr. Parass.
“We have great momentum across our business and are taking market share,” he added.
In light of these strong results, we see the insider buying here as a bullish signal.