Insider buying can provide clues about a stock’s next move. Insiders sell company stock for a number of reasons. Yet they only buy stock for one reason – they expect it to rise.
Here, we are going to highlight an insider purchase at Kingfisher PLC (KGF:LN). Kingfisher is a multi-channel home improvement retailer that operates predominantly in the UK, Ireland, and France. Its main brands are B&Q, Brico Depot, Castorama, and Screwfix. It’s traded on the London Stock Exchange and currently has a market capitalization of £5.1 billion.
Kingfisher PLC: Insider Buying
Our insider transaction data shows that on April 11, a Non-Executive Director at Kingfisher, Jeffrey Carr, purchased 200,000 KGF shares at a price of £2.60. This purchase cost the insider £520,000 (approx. $680,000).
Experienced Financial Director
Mr. Carr has considerable experience in the retail consumer space. Since April 2020 he has been CFO at global consumer goods giant Reckitt Benckiser and prior to this he was CFO of the retailer Koninklijke Ahold Delhaize N.V. He has also been Group Finance Director at both First Group and EasyJet. This experience means he is likely to have a good understanding of Kingfisher’s prospects.
What stands out about this trade is that it has boosted Mr. Carr’s holding by a significant percentage. The insider has been involved with Kingfisher since 2018 but only held 10,000 shares until this recent insider transaction in which he picked up 200,000 shares. The fact that he has bought so many shares now suggests that he is very confident that the stock is currently undervalued by the market.
Attractive Long-term Drivers
Kingfisher saw growth throughout all of its businesses in full-year 2020/2021 which enabled it to generate record revenues and profits.
Sales came in at £13.18 billion which was a 6.8% increase on the year before, while gross profit of £4.94 billion was up 7.9% on the year prior. The company gained market share in both the UK and France and online sales continued to rise, making up 18% of total sales, up from 8% two years ago. On the back of this solid performance, the total dividend was raised to 12.4 pence which was up on the 8.25 pence that was distributed to shareholders in 2019/2020.
“We are now over two years into our new strategy and execution is ahead of schedule. With the business in a strong position, we are accelerating our investments for growth. Looking forward, we are confident that these investments, supported by continued strong execution and the new demand-drivers we are seeing in our industry, will drive faster growth in sales, profit, and free cash flow,” said CEO Thierry Garnier.
It’s worth noting that Deutsche Bank believes that Kingfisher should continue to trade strongly due to long-term drivers that will create demand for their products. High energy prices mean that the demand for energy efficient homes will increase and people working from home in old houses will look to improve their insulation. Deutsche Bank points out that younger consumers tend to be more engaged with ‘do it yourself’.
On the back of these impressive results and the attractive outlook for Kingfisher, we see the recent insider buying at the company as bullish. The large buy from the Non-Executive Director suggests that he believes the valuation does not reflect the company’s true intrinsic value.