CFO purchases can be very informative insider transactions. CFOs tend to be intimately acquainted with their firms’ financials and some studies have found that these insiders earn higher returns following their purchases of company shares than CEOs.
In this report, we are going to highlight a large CFO purchase at Science Applications International Corporation (SAIC:US). Science Applications International is a technology company that provides services to the US Department of Defense. Specializing in technology integration, it offers solutions relating to IT modernization, cybersecurity, cloud computing, and data analytics. The company is listed on the New York Stock Exchange and currently has a market capitalization of $5.0 billion.
Science Applications International Corporation: Insider Buying
Our records show that on 5 April, Science Applications International’s CFO Prabu Natarajan bought 3,000 SAIC shares at a price of $84.31. This purchase – which cost Natarajan a total of $252,930 – increased the insider’s holding by approximately 23%.
We see this insider purchase as a high-conviction, informative trade. Natarajan is a top-level insider with significant industry experience. Prior to joining SAIC in January 2020 he was vice president of financial planning and merger and acquisition for Northrop Grumman and a member of the company’s Chief Financial Officer Council. He is likely to have a good read on the industry and his firm’s prospects.
Additionally, his purchase is large both in nominal and relative terms. The fact that he has increased the size of his holding by nearly 25% suggests that he is confident the stock is set to move higher.
New Contract Wins
Science Applications International posted a solid set of full-year 2020 results in late March. For the year, revenue was up 11% to $7.1 billion, boosted by the acquisition of Unisys Federal, while adjusted earnings per share were also up 11% to $6.27. Net cash from operating activities jumped 65% to $755 million.
Since then, the company has landed a number of new contracts. On 7 April, it announced that it had won a $3.6 billion contract with the US Army to provide engineering services supporting hardware-in-the-loop (HWIL) and modeling and simulation development. The same day, it advised that it had also won an $800 million contract with the US Army for modelling and simulation systems engineering.
In light of these developments, and the fact that the stock is currently trading at a very undemanding valuation, we see the insider purchase here as a bullish signal.