CFO purchases can be very informative insider transactions. CFOs have considerable insights into their firms’ financial health and some studies have found that these insiders earn higher profits following their purchases of company stock than CEOs.
In this report, we are going to highlight some CFO buying at Smiths Group PLC (SMIN:LN). Smiths Group is a technology company that operates in a number of markets including healthcare, security and defence, space and aerospace, mining, and energy. Headquartered in the UK, it has operations in over 50 countries worldwide. The company is listed on the London Stock Exchange and currently has a market capitalization of £5.7 billion.
Smiths Group: Insider Buying
Our data shows that on 4 October, CFO John Shipsey bought 6,902 SMIN shares at an average price of £14.42 per share. This purchase cost the insider just under £100,000 and increased his holding to 45,282 shares.
Mr. Shipsey has a considerable level of industry experience. Prior to joining Smiths Group in January 2018, he was CFO at Dyson, a diversified global technology company. At Dyson, he was part of the team leading the company’s global growth, particularly in Asia. Before joining Dyson, he was at Diageo for 13 years in a number of senior finance and strategy roles.
What stands out about this trading activity from the CFO is that it has increased the size of his holding by a significant 18%. This suggests that he is confident the stock is set to move higher.
It’s worth noting that, with the exception of a large purchase from CEO Paul Keel in August, shortly after he joined the firm, this trade represents the largest insider buy at Smith Group for several years.
8% Increase in Dividend
Smiths Group recently posted a solid set of full-year results for the year ended July 31, 2021.
While underlying revenue for the full year was down 2%, revenue was flat in the second half, and up in Q4, which suggests that business conditions are improving. Encouragingly, the group saw margin improvement across all divisions which resulted in a 7% increase in operating profit for the year, along with an 8% rise in earnings per share. On the back of these results, the group raised its dividend by 8%.
Looking ahead, the group said that it expects revenue to return to pre-Covid-19 levels this year. It added that it is “increasingly confident” about its future prospects and that it is well positioned for a number of long-term trends including safety, sustainability, and digitization.
“Smiths has high quality businesses with strong fundamentals and is well positioned in markets with near-term upside and attractive long-term growth drivers,” said CEO Paul Keel.
Putting this all together, we see the insider buying here as a bullish indicator. It suggests that the CFO is confident about the future and that he expects the stock to rise.