If a CEO is buying company stock, it’s often worth investigating the stock further. CEOs tend to have an intimate understanding of their businesses and are usually way ahead of analysts and portfolio managers when it comes to revenue and earnings trends.
In this report, we are going to highlight a CEO purchase at Wickes PLC (WIX:LN). Wickes is a UK home improvement retailer that has over 230 stores across the country. Digitally-led, it operates a low cost, efficient, integrated business model. The company is listed on the London Stock Exchange and currently has a market capitalization of £487 million.
Wickes: Insider Buying
Our insider transaction data shows that on March 25, Wickes’ CEO David Wood bought 55,412 shares at a price of £1.79 per share. This trade cost the insider £99,200 and increased his holding to 131,174 shares.
An experienced executive and CEO, Mr. Wood has nearly 30 years of experience in the retail consumer space. Before joining Wickes Group in May 2019, he worked at Tesco, Unilever, and Mondelez. This background means that he is likely to have a good understanding of his company’s prospects.
What stands out about this trade is that it has increased the size of Mr. Wood’s position by 73%. The fact that the insider has boosted the size of his holding by such a large percentage suggests that he is very confident the stock is set to move higher.
New Capital Allocation Policy
Wickes recently posted a solid set of results for 2021.
For the year, revenue was up 14% year on year to £1.53 billion driven by market share gains, range development, and a strong digital performance. Meanwhile, adjusted profit before tax increased to £85.0 million versus £49.5 million a year earlier. The group noted that its growth was over twice that of the market.
On the back of this performance, Wickes set out a capital allocation policy. It now plans to accelerate investments to drive further growth while at the same time enhancing its ordinary dividend to 40% of adjusted profit after tax, targeting IFRS net debt leverage consistently less than 2.75x, and returning excess capital available to shareholders over time.
“Our strategy is delivering strong growth and return on investment. The results we are seeing, plus these strong returns, give us confidence to accelerate our investments to drive further growth,” said Mr. Wood.
“While we recognize the pressure that consumers will be facing in 2022, we have the right model, a strong pipeline and order book, and remain confident of making further progress in the current year. We expect to continue outperforming the market and are well-placed to capitalize on the ongoing requirement for home improvement,” he added.
In light of the solid results here, and the confidence from the CEO, we see the insider buying as bullish.