Insider buying can provide investors with valuable clues about a stock’s potential. This is because company insiders tend to have the most up-to-date information on their companies’ prospects.
Here, we are going to highlight a large CFO purchase at Spirent Communications (SPT:LN). Spirent Communications is a UK technology company that provides solutions to develop devices and equipment and to operate networks worldwide. It’s listed on the London Stock Exchange and currently has a market capitalization of £1.53 billion.
Spirent Communications: insider buying
Regulatory filings show that on 19 November the CFO of Spirent Communications, Paula Bell, purchased 50,000 SPT shares at a price of £2.57 per share. This purchase – which cost the insider approximately £130,000 – boosted her holding by 16%.
First large purchase for years
Our data indicates that this CFO purchase is the first insider buy of significance at Spirent Communications for a long period of time. We see this as bullish. Moreover, in upping her holding by 16% Bell has signaled to the market that she is confident in Spirent Communications’ future prospects. She has been at the company for four years now which means she is likely to have a good handle on the factors that will enable future growth in the share price. Our Insider Model views this trade as a positive for the insider sentiment at Spirent Communications.
5G driving growth
Growth driven by 5G has seen the SPT shares rise by 19% in 2020 after big gains in recent years. The order book has been growing and profitability has been rising, with 5G responsible for a high number of contract wins. The latest trading Q3 trading update suggests that revenue growth is continuing at mid-single digits as expected. Demand for 5G services continues to show strong growth and demand came from all regions. The shares have pulled back by over 20% from the level they hit in early November, however.
Given the solid trading update and the weakness in the shares in recent weeks, we see the insider buying here as a bullish signal. It suggests that the CFO feels that the shares are being undervalued by the market at current levels.