If multiple insiders are buying company stock within a short period of time, it’s often worth taking a closer look. This buying pattern – which is known as ‘cluster buying’ – is a particularly strong insider trading signal.
In this report, we are going to highlight some recent cluster buying at The AZEK Company Inc (AZEK:US). The AZEK Company is a manufacturer of environmentally-friendly outdoor building products. Its products include TimberTech decking, AZEK Trim, and Ultralox railing. The company is listed on the New York Stock Exchange and currently has a market capitalization of $5.2 billion.
The AZEK Company Inc: Insider Buying
Our data shows that on February 7, four insiders at AZEK purchased stock. Those who picked up shares were:
- CFO Peter Clifford (13,000 shares @ $30.24 per share)
- Chief Legal Officer Paul Kardish (9,100 shares @ $30.33 per share)
- Director Vernon Nagel (5,000 shares @ $30.41 per share)
- Director Brian Spaly (16,000 shares @ $30.70 per share)
Combined, these four insiders spent around $1.3 million on stock.
Bullish Cluster Buying Pattern
There are several things that stand out about this cluster buying pattern.
One is that, combined, the insiders have spent a substantial amount of money on stock. Our data shows that this buying activity represents the largest amount of insider buying at AZEK within a quarter for several years.
Another is that several of the insiders in the cluster have increased the size of their positions significantly. CFO Peter Clifford, for example, has increased the size of his holding by 42%. Board member Vernon Nagel, meanwhile, has increased the size of his holding by 152%. This indicates that there’s a high level of confidence behind these purchases.
Full-Year Guidance Raised
AZEK’s recent Q1 fiscal 2022 results were strong.
For the period, consolidated net sales amounted to $259.7 million, an increase of 22.3% year over year. Meanwhile, net income increased by $6.6 million year over year to $16.7 million. Net margin expanded to 6.4% for the three months ended December 31, 2021, as compared to net margin of 4.8% for the three months ended December 31, 2020.
On the back of this strong performance, the company raised its full-year fiscal 2022 guidance. It now expects consolidated net sales growth of 17% to 21% year over year, inclusive of recent acquisitions, along with adjusted EBITDA growth of 18% to 22% year over year, inclusive of recent acquisitions.
“We continue to see strong underlying market demand driven by positive demographic trends, an increasing focus on outdoor living, and the ongoing desire to convert from wood to our types of low-maintenance, high-performance alternative materials. We are on track to meet and exceed our long-term goals and we remain confident in our ability to deliver above market sales growth and core margin expansion during fiscal 2022,” said CEO Jesse Singh.
In light of these good results, and the confidence from the CEO, we see the insider buying here as a bullish indicator.