Insider Buying

Insider Buying Report: Rent-A-Center Inc (RCII:US)

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Rent-A-Center Inc
(RCII:US)
12 months:
+46%
Activity:
Bullish
Pattern:
Purchase from Chairman and director
News:
Solid Q3 results
Rent-A-Center Inc
(RCII:US)
12 months:
+46%
Activity:
Bullish
Pattern:
Purchase from Chairman and director
News:
Solid Q3 results

Insider buying can provide clues about a stock’s next move. Insiders sell company stock for many reasons. But they only buy stock for one reason – they expect it to go up.

In this report, we are going to highlight some interesting insider buying at Rent-A-Center Inc (RCII:US). Rent-A-Center is a rent-to-own company based in Plano, Texas. Operating over 2,000 stores across the US, Canada, Mexico and Puerto Rico, it enables credit-constrained consumers to obtain ownership of products such as computers and tablets, smartphones, electronics, appliances, and furniture under rental purchase agreements. It is listed on the NASDAQ Global Select Market and currently has a market capitalization of $2.9 billion.

Rent-A-Center Inc: Insider Buying

Our data shows that on November 8, two insiders at Rent-A-Center made large stock purchases. The largest purchase was from Chairman Jeffrey Brown, who picked up 24,330 shares at a price of $43.97. This trade cost the insider $1.1 million. Independent Director Christopher Hetrick made a smaller purchase, picking up 15,000 shares at a price of $44.50. This trade cost the insider $667,500.

The graph represents Rent-A-Center Inc' price history, with significant buy and sell events highlighted.

High-Conviction Purchases

This trading activity caught our attention due to the size of the purchases. Our records show that these two trades combined represent the largest amount of insider buying within a quarter at Rent-A-Center for several years. Our Insider Model views the buying activity as positive.

It’s worth noting that these trades have increased the size of both insiders’ holdings significantly. Brown’s purchase has increased the size of his position by 50%. Meanwhile, Hetrick’s trade has increased the size of his position by 109%. This indicates that they are high-conviction purchases and suggests that the insiders are very confident that the stock is set to move higher.

Strong Fundamentals

Rent-A-Center posted a solid set of Q3 results on November 3.

For the quarter, consolidated revenues were $1.2 billion, up 65.9% year on year, boosted by the acquisition of Acima Holdings, LLC which closed in the first quarter of 2021. On a pro-forma basis, revenues grew 13%, led by organic growth in the Acima and Rent-A-Center Business segments.

Adjusted EBITDA for the quarter was $170.2 million, up 4.1% year over year on a pro-forma basis, while Non-GAAP diluted earnings per share came in at $1.52 compared to $1.04 in the prior year period.

During the third quarter of 2021, the company returned $38 million of cash to shareholders through a combination of $18 million in dividends and $20 million in share repurchases.

Looking ahead, management was very confident that the company can continue to grow. “With significant scale in Lease-to-Own and a revolutionary digital commerce platform, the Company is executing on a long-term strategic plan that we believe will drive growth, expand our customer base, and create shareholder value for years to come. Given the strong fundamentals we are seeing and the progress we are making against strategic objectives, we remain confident that the Company will achieve $6 billion of revenue with mid-teens adjusted EBITDA margin by the end of 2023,” said CEO Mitch Fadel.

“We believe Lease-to-Own is in the early stages of a transformation that will see significant additional consumer adoption over the next few years, especially when enabled with new technology like the Acima Ecosystem," he added.

In light of these results, and the confident outlook statement, we see the insider buying here as a bullish indicator.

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