Several academic studies have found that the most profitable insider transactions occur in small-cap firms. This segment of the market is less efficient meaning there’s more potential for large share price movements.
In this report, we are going to highlight some interesting insider buying at a small US company, Quanex Building Products Corporation (NX:US). Quanex manufactures components that are sold to Original Equipment Manufacturers (OEMs) in the building products industry. Its products include energy-efficient fenestration products as well as kitchen and bath cabinet components. The company is listed on the New York Stock Exchange and currently has a market capitalization of $815 million.
Quanex Building Products Corp: Insider Buying
Our data shows that between December 21 and December 28, board member Jason Lippert bought 20,450 NX shares at an average price of $24.36 per share. This trading activity cost the insider just under $500,000.
Meanwhile, on December 27, President and CEO George Wilson bought 4,021 shares at a price of $24.91 per share. This trade cost the insider $100,162.
This trading activity is worth highlighting due to the fact that the two insiders have spent a considerable amount of money on Quanex stock. Our records show that these purchases represent the largest amount of insider buying within a quarter at Quanex for several years. Our Insider Model views this trading activity as very bullish.
Quanex recently posted a solid set of Q4 results given that, like many companies, it experienced supply chain challenges in 2021.
For the quarter ended October 31 2021, net sales amounted to $291.8 million, up 14.2% year on year while adjusted net income came in at $20.8 million versus $22.0 million in Q4 2020. Meanwhile, for the full fiscal 2021 year, net sales amounted to a record $1072.1 million, up 26% year on year, while adjusted net income was $58.6 million, up 44% year on year.
On the back of these results, the company authorized a new $75 million share repurchase program to return capital to shareholders.
“Demand for the products we manufacture remained strong throughout our fiscal year and that continues today. Despite challenges related to the supply chain and inflation, we reported record revenue growth and record earnings for the year,” commented George Wilson, President and Chief Executive Officer. “We feel confident in our ability to realize margin expansion on a consolidated basis in fiscal 2022, second half weighted, and we remain cautiously optimistic for the year,” he added.
In light of these results, we see the insider buying here as a bullish indicator.