There are two main reasons why company insiders invest in their own companies. They either believe that business is about to improve or that the company is undervalued. Whatever the reason is, outsiders only need to know one thing: insiders think that the company stock price will rise.
Here, we are going to highlight some interesting insider purchases at Senior PLC (SNR:LN). Senior designs, manufactures, and markets high-technology components and systems for the principal original equipment producers in the aerospace, defense, land vehicle, and power and energy markets worldwide. It’s traded on the London Stock Exchange and currently has a market capitalization of £487 million.
Senior PLC: Insider Buying
Regulatory filings show that between 17 March and 18 March multiple insiders at Senior bought stock. CEO David Squires purchased 55,000 shares at a price of £1.18 per share. Ian King, the Chairman, purchased 100,000 shares at a price of £1.18. This increased his holding by just under 25%. Bindi Foyle, the Finance Director, bought 38,788 shares at a price of £1.18, which increased her holding by approximately 30%. Company Secretary Andrew Bodenham also purchased 42,950 shares at a price of £1.17.
This insider buying is significant for two main reasons. The purchase of stock by several key insiders in a short time period tells us that there is a consensus of opinion that the stock is set to move higher. Our data highlights that three of the four insiders bought stock in the second half of last year at much lower levels which suggests they time their purchases well.
It’s worth noting that the Chairman and Finance Director have both increased their holdings by a substantial amount in percentage terms. This signals that they strongly believe the share price will rise in the future.
Senior has been hit hard by the impact of Covid-19 and the grounding of Boeing’s Max 737 aircraft. This meant that 2020 revenue was down 34% year on year. The company acted swiftly to deliver savings, however, and was able to generate £46.5 million of free cash flow. Net debt/EBITDA stood at 2.8x with comfortable liquidity headroom of £157.1 million. The divestiture of Senior Aerospace Connecticut brought in proceeds of £53 million. The Max 737 has also returned to service which is encouraging.
Looking ahead, the company believes that it will emerge strongly from the pandemic. “Our differentiated offering in fluid conveyance and thermal management products; our investment in low carbon and advanced manufacturing technology; our global footprint; our strong track record and commitment to the highest ESG standards; and our positioning in attractive and diverse end markets will help to ensure that we emerge strongly as the recovery starts to take shape," said CEO David Squires the CEO of Senior commented
It’s worth noting that broker Peel Hunt recently upgraded Senior to ‘add’ from ‘reduce’ and set a price target of 128p, up from 92p. The brokerage believes that the aerospace industry will recover in the medium term and that Senior will see momentum in 2022 when Boeing increases production of their MAX aircraft.
On the back of the optimistic medium to long-term outlook, we see the recent insider cluster buying as bullish. It suggests that the insiders feel the market is undervaluing their company, given its future prospects.