Research on insider transaction activity shows that insiders at small firms tend to earn greater profits from their stock purchases than insiders at large firms. The reason for this is that smaller companies are less researched than larger companies. As a result, they are often less efficiently priced.
In this report, we are going to highlight some insider buying at a German small-cap firm, Schaltbau Holding AG (SLT:GR). Schaltbau is a technology company that specializes in smart solutions for power and mobility. Its areas of expertise include decentralized energy, rail infrastructure, rolling stock, and autonomous road vehicles. The company is listed on Deutsche Börse’s Xetra and currently has a market capitalization of €287 million.
Schaltbau Holding AG: Insider Buying
Since the beginning of March, we have observed a number of interesting transactions at Schaltbau. In the first half of March, CEO Juergen Brandes purchased SLT stock three times. In total, the insider acquired 2,661 shares, taking his holding from 1,625 shares to 4,286 shares.
More recently, CFO Steffen Munz has also made three purchases. Since making his first purchase on 12 March (2,000 shares), he has purchased another 4,000 shares, taking his holding to 6,000 shares.
This insider activity is significant for a few reasons. Firstly, these are top-level insiders that have purchased stock. They are likely to have a good understanding of the company’s prospects. It’s worth noting that Brandes has more than 35 years of professional experience in the fields of electrical engineering, electrical engineering, and automation and previously spent many years at Siemens AG.
Secondly, both insiders have increased their holdings substantially. Brandes, for example, has increased the size of his holding by 164%. This indicates that he firmly believes the stock is set to move higher.
Schaltbau delivered a strong performance in 2020 given the economic environment. For the year, revenue came in at €502.3 million versus €513.7 million in 2019, while EBIT came in at €21.7 million versus €17.2 million in 2019. EBIT margin rose to 4.3% from 3.3% in 2019 while return on capital employed for the year was 8.1%, up from 6.4% in 2019.
Looking ahead, the company was optimistic about its prospects. For 2021, it expects total revenue of between €520 and €540 million with an EBIT margin in the region of 5%. Meanwhile, by 2026, it aims to achieve revenue of between €750 million and €800 million.
“The fiscal year 2021 will certainly continue to be impacted by the pandemic in many respects. However, we are now strategically positioned in a way that enables us to participate in the expected post-corona upswing to an exceptional extent,” said CEO Jurgen Brandes.
In light of this outlook, we see the insider purchases here as bullish.