There are two main reasons why insiders invest in their own companies. They either believe that business performance is about to get better, or that the company is undervalued. Whatever the reason, insider buying tells us that those within the company expect the company’s stock price to go up.
In this article, we are going to flag some interesting insider buying at Reynolds Consumer Products Inc (REYN:US). Reynolds Consumer Products is a US consumer-branded and private-label products company that sells cooking products, waste and storage products, and tableware. It is listed on the NASDAQ Global Select Market and currently has a market capitalization of $6.3 billion.
Reynolds Consumer Products: insider buying
Form 4 filings show that on 16 November, two insiders at Reynolds Consumer Products purchased stock. Those who purchased shares included President and CEO Lance Mitchell, who picked up 16,500 shares at a price of $29.86 per share, and board member Gregory Cole, who acquired 3,000 shares at a price of $29.81 per share. In total, these insiders spent around $580,000 on company stock.
Source: 2iQ Research
Multiple insider purchases
This insider buying is worth highlighting for several reasons. Firstly, Mr. Mitchell has served as Reynolds Consumer Products’ President and Chief Executive Officer since 2011. This means he is likely to have an excellent understanding of the company. This purchase of shares from the insider, which was worth just under half a million dollars, suggests he is confident about the future.
Secondly, this is the second time since mid-August that two insiders have bought large amounts of Reynolds Consumer Products stock. In total, four insiders have made substantial purchases in the last three months. This tells us that there is a consensus of opinion that the stock is undervalued right now.
Strong Q3 results
Reynolds Consumer Products posted an excellent set of third-quarter results on 11 November. For the period, revenue came in at $823 million (versus the consensus of $797 million), compared to $741 million in the same period last year. Meanwhile, net income increased to $113 million compared to $63 million in the third quarter of 2019.
Growth was driven by strong demand across all business segments, reflecting the increased every day at-home use and the impact of new products. As a result of this strong performance, the group upgraded its guidance for the full year.
“We delivered a quarter of strong organic sales growth, adjusted EBITDA, and earnings per share, enabling us to increase our outlook for the year,” commented Mr. Mitchell.
Reynolds Consumer Products’ stock has underperformed over the last six months, despite the strong Q3 performance. Insiders clearly see value at the current price. We see the insider buying here as a bullish signal.