Insider buying can provide investors with valuable clues in regards to a company’s potential. Insiders sell stock for numerous reasons but they will only buy stock for one reason – they expect the share price to rise.
Here, we are going to highlight an insider purchase at M&C Saatchi PLC (SAA:LN). M&C Saatchi provides advertising and marketing services in Europe, the Middle East, Africa, Asia, Australia, and the Americas. It’s traded on the London Stock Exchange’s AIM market and currently has a market capitalization of £207 million.
M&C Saatchi PLC: Insider Buying
Regulatory filings show that between 5 March and 8 March the Chairman of M&C Saatchi, Gareth Davis, purchased 102,720 SAA shares at an average price of £1.505 per share. This purchase cost the insider approximately £155,000 and created a new holding for him in M&C Saatchi.
Wealth of Experience
Gareth Davis has held a number of senior positions within companies in different industries. He is a Non-Executive Director of Gresham House PLC, the asset manager which would suggest he is very able to make credible investment decisions. Other roles he has undertaken include the role of Chief Executive at Imperial Tobacco PLC, Chairman of DS Smith and Chairman of William Hill PLC.
Having been with M&C Saatchi for over a year it is interesting that Davis has decided to invest in company stock now. It is a sizeable purchase in monetary terms and suggests Davis is confident that there will be further growth in the share price.
Trading Ahead of Expectations
The latest Q4 trading update was ahead of market expectations and the shares have nearly doubled as a result. The net cash position was very strong and stood at £33 million at the end of 2020. The company set out clear five-year targets and a strategy to ensure the future success of the business. The company is looking to achieve operating profit growth of above 25% CAGR between FY2020 and FY2025. It is hoped group operating margin will reach 18% by 2025 with the company looking to improve margins across all divisions as well as generating strong free cash flow.
Moray MacLennan, the CEO, commented: “The marketing landscape is changing in profound ways. M&C Saatchi’s belief in the power of communications and creativity to change the world is as relevant and important as ever, but we also need to evolve. We will be a simpler, better-connected global company, with technology working hand-in-hand with creativity, led by a clear mission: to navigate, create and lead meaningful change. We see great opportunity ahead and I am confident that this renewed focus will enable us to capture it.”
On the back of strong trading and optimism for the future, we believe that the recent insider buying is bullish. It would suggest that the Chairman is confident in M&C Saatchi’s future prospects and that further growth in the share price is to come.