Top-level corporate executives such as CEOs and CFOs tend to have a high level of information in relation to their own companies. If these insiders are buying company stock, it can be a sign that the stock is undervalued.
In this report, we are going to highlight a large CFO purchase at Parsons Corp (PSN:US). Parsons Corp is a provider of technology solutions to the defense, intelligence, and critical infrastructure markets. It is listed on the New York Stock Exchange and currently has a market capitalization of $3.3 billion.
Parsons Corp: insider buying
Form 4 filings show that on 6 November, Parson’s CFO George Ball purchased 20,000 PSN shares at a price of $30.25 per share. This purchase, which increased the size of the insider’s holding from 55,000 shares to 75,000 shares, cost a total of $605,000.
Source: 2iQ Research
This insider purchase is significant for several reasons. Firstly, it is a large purchase in both nominal and relative terms. Ball – who was appointed CFO in 2008 – has increased the size of his holding by 36% which suggests that he is confident that the stock is undervalued at present.
Secondly, the last time Ball purchased Parsons stock, in March 2020, the stock rose more than 30% in the next two months. In other words, his last purchase was timed very well. Our Insider Model sees the insider activity here as bullish.
New contracts accelerate growth strategyParsons recently posted a solid set of third-quarter results. While revenue was down 2% for the period, adjusted EBITDA was up 13%. Adjusted EPS increased to $0.57, compared to $0.53 in the third quarter of 2019. The group advised that its strong operational performance enabled it to win large new contracts in high-priority national security markets which will accelerate its growth strategy.
Chuck Harrington, Chairman and CEO commented: "We delivered strong third-quarter results with record adjusted EBITDA and generated outstanding cash flow. We continue to execute our strategic plan and look forward to further leveraging our strong balance sheet to drive additional shareholder value."
In light of these results, and the upbeat tone from management, we see the insider buying here as a bullish signal.