When an insider makes a large purchase of their own company’s stock, investors should take note. It’s not an exaggeration to say that these individuals are amongst the most informed participants in the market.
Here, we are going to highlight a large insider trade at Illinois Tool Works (ITW:US). Illinois Tool Works is a leading manufacturer of specialized industrial equipment. Operating in 55 countries across the world, the company manufactures innovative products that are used in a wide variety of applications including deep-sea oil rigs, aerospace technology, wind turbines, cars, and mobile devices. Illinois Tool Works is listed on the New York Stock Exchange and currently has a market capitalization of $76 billion.
Illinois Tool Works: Insider Buying
Our data shows that on November 10, board member Jay Henderson bought 10,000 ITW shares at a price of $235.29 per share. This purchase cost the insider just under $2.4 million and increased his holding by just over 100%.
Mr. Henderson has been a director at Illinois Tool Works for five years which would suggest he is familiar with the company and how it operates. He is a trained accountant and was previously Vice Chairman of Client Services for nine years at PwC as well as PwC’s Greater Chicago Market Managing Partner for ten years. He is also a director at The J.M. Smucker Company where he has previously served on the Business Risk Committee. This experience means he is likely to have a good understanding of the company and the risks it faces.
The fact that Mr. Henderson has more than doubled his stake in the company suggests that he is very confident the stock is undervalued at present. Looking at our data, we can see there has been no insider buying at the company for over a year and we think it’s significant that an insider with a strong accountancy background has spent close to $2.5 million on company stock.
High Single-Digit Revenue Growth
Illinois Tool Company’s recent Q3 2021 results showed that the company had strong momentum throughout the majority of its business segments in the last quarter.
Total revenue of $3.6 billion was an increase of 8% on Q3 2020 with organic revenue growing by 6%. Revenue was higher by 12% when the Automotive OEM segment was stripped out. The Welding and Food Equipment segments were the strongest performers, experiencing organic growth of 22% and 19% respectively. The GAAP EPS of $2.02 was 10% higher than a year prior.
Looking ahead, the company said that for the full year, it expects total revenue growth of 13-14% and organic growth in the range of 11-12%.
“Our teams around the world continue to do an exceptional job of executing for our customers and for the company in a very challenging environment as evidenced by the six percent organic growth and ten percent earnings per share growth that ITW delivered in the quarter. Moving forward, we remain highly focused on fully leveraging the competitive strength of the ITW Business Model and the investments we have made, and continue to make, in support of the execution of our enterprise strategy and our ‘Win the Recovery’ positioning to their full potential,” said E. Scott Santi, Chairman and Chief Executive Officer.
Considering this upbeat third-quarter statement, we see the recent insider buying at Illinois Tool Company as a bullish development. In spending a significant amount of dollars on company stock, the insider is showing that he is very confident that the market is undervaluing the shares.