Top-level corporate insiders such as CEOs and Chairmen tend to have the most up-to-date information on their businesses. If they’re buying company stock, it’s often a sign that business performance is strong and that the outlook for the stock is attractive.
In this report, we are going to highlight a purchase from a top-level insider at Kainos Group PLC (KNOS:LN). Kainos is a British company that specializes in digital transformation services. Operating in 23 countries, it provides solutions related to cloud, automation, data, and AI. The company is listed on the London Stock Exchange and currently has a market capitalization of £2.3 billion.
Kainos Group: Insider Buying
Our insider translation data shows that on November 17, Kainos’ Chairman Tom Burnet bought 13,865 shares at a price of £18.04 per share. This trade cost the insider approximately £250,000 and increased his holding to 28,253 shares.
Largest Insider Buy Since 2016
This trade is worth highlighting for a couple of reasons. Firstly, it is large in size. Our records show that it is the largest insider purchase at Kainos since early 2016.
Secondly, it has increased the size of the Chairman’s holding by a very significant 96%. This suggests that he is very confident the stock is set to move higher.
It’s worth noting that Mr. Burnet has experience both in the technology sector and the financial services sector. In his last executive role, he was CEO of Accesso Technology Group, the leading supplier of technology solutions to the leisure industry. Meanwhile, he currently serves as Non-Executive Chairman of the Baillie Gifford US Growth Trust plc, a FTSE 250 investment trust. This background means he is likely to have a good understanding of the intrinsic value here.
Share Price Pullback
Kainos’ recent interim results for the half-year to 30 September showed that the company is still growing at a rapid rate.
For the period, revenue was up 33% to £142.3 million, while software-as-a-service bookings were up 118% to £31.0 million.
The results weren’t perfect though and profitability was a weak spot. Here, adjusted pre-tax profit was only up 12%. The company advised that margins were constrained due to salary increases and elevated use of contract staff.
As a result of this underwhelming profit growth, the share price pulled back. On the day of the results, the stock fell more than 9%, making it the worst performer in the FTSE 250.
The large purchase from the Chairman here suggests that he’s confident about the future and that he expects the stock to bounce back. We see this insider activity as a bullish indicator.