Insider transactions can give investors a more complete view of what’s going on within the world’s publicly-listed companies. No one has more knowledge of a company, and its prospects, than its executives and directors.
In this report, we are going to highlight some interesting insider buying at SAP SE (SAP:GR). SAP is a multinational software company that develops enterprise software to manage business operations and customer relations. It is the largest European software company by revenue. The group is listed on Deutsche Börse’s Xetra and currently has a market capitalization of €142.6 billion.
SAP: Insider Buying
Our insider transaction data shows that in recent weeks, three insiders at SAP have bought stock. The largest purchase was from CFO Luka Mucic, who purchased 3,360 shares at a price of €114.58 on 4 June. This purchase cost the insider €385,000.
The other insiders who picked up stock were Executive Board member Thomas Saueressig (2,978 shares @ €115.50 on 28 May) and Chief Technology Officer Juergen Mueller (541 shares @ €114.00 on 17 May). Combined, the three insiders spent around €790,000 on SAP stock.
This insider trading activity is worth highlighting for a few reasons. Firstly, two of the purchases are very substantial in size. This shows a level of commitment from the insiders.
Secondly, our data shows that the CFO’s purchase of 3,360 shares has increased the size of his holding by 38%. This suggests he is very confident that the stock is set to move higher.
Third, two of these insiders have made well-timed purchases in the recent past. In October last year, both Mucic and Mueller bought stock after it pulled back when the company reduced its revenue guidance. Since then, the stock has risen from around €100 to €115.
SAP’s recent first-quarter results were encouraging. While total revenue was down 3% year on year to €6,348 million, cloud revenue was up 7% to €2,145 million. During the quarter, the company saw its fastest growth in new cloud business in five years. At the end of the period, the cloud backlog stood at €7.6 billion, up 19% year on year at constant currencies.
For the period, earnings per share (IFRS) came in at €0.88, up 29% year on year, while free cash flow was up 10% to €2.85 billion. On the back of these results, SAP proposed a dividend of €1.85 per share for fiscal year 2020, representing a year-over-year increase of 17%.
Management was optimistic in relation to the outlook. “We are seeing very strong order entry growth across our applications portfolio. We are well on track with our strategy to deliver robust cloud growth,” said CEO Christian Klein. “In the mid term SAP’s expedited shift to the cloud will accelerate top-line growth and significantly increase the resiliency and predictability of our business,” added the CFO.
In light of these results, we see the insider buying here as bullish.