Insider trading can provide investors with valuable clues about a stock’s potential. Insiders sell company stock for many reasons. But they only buy stock for one reason – they expect it to go up.
Here, we are going to highlight an interesting insider purchase at Purplebricks Group PLC (PURP:LN). Purplebricks is an online real estate business that operates in the United Kingdom, Canada, and Germany. It’s listed on the London Stock Exchange’s AIM market and currently has a market capitalization of £304 million.
Purplebricks Group PLC: Insider Buying
Regulatory filings show that on 6 April, Senior Independent Non-Executive Director of Purplebricks, Simon Downing, purchased 257,884 PURP shares at a price of £0.97 per share. This purchase cost the insider approximately £250,000 and increased his holding by around 40%.
Significant Increase in Holding
This insider trade stands out for two reasons. Firstly, this purchase has significantly increased Downing’s holding which signals to investors that he is confident that the share price is set to rise.
Secondly, our data shows that Downing has a high short-term trading IQ which tells us he picks his trading levels well. He bought a significant amount of stock in the third quarter of 2020 at levels close to 50% below where he recently bought stock.
Despite ongoing challenges from Covid-19, Purplebricks was able to produce impressive first-half results. Total fee income increased 6% to £49.1 million compared to H1 2020 and adjusted EBITDA increased 110% to £8.4 million. Operating profit increased to £6.9 million from a £0.2 million loss a year before. Cash has increased by £44.8 million since the 2020 year end to £75.8 million. As a result of this performance, the company raised its expected EBITDA guidance for the full-year.
"We are now emerging from the pandemic in a very strong competitive position. Our focus for 2021 will be to re-accelerate the growth of our core business by continuing to enhance our digital innovation, our virtual capabilities and increasing agent productivity through automation and efficiency. This period has shown that our technology-led business model is now more relevant than ever, as customers continue to shift to being more comfortable buying and selling their homes digitally," said CEO Vic Darvey.
We see the insider buying here as bullish, given these strong results and positive outlook comments. It would indicate that the insider expects the share price to continue to climb despite its recent strong performance.