Following insider buying at smaller companies can be a lucrative investment strategy. Smaller companies are less researched than larger businesses, meaning that they offer greater potential for outperformance.
In this report, we are going to highlight insider buying at a small Danish company, Matas A/S (MATAS:DC). Matas is a retail company that is focused on beauty, health, and wellbeing. One of Denmark’s most recognizable brands, it has over 250 stores across the country. It is listed on the OMX Nordic Exchange Copenhagen and currently has a market cap of around DKK 3.7 billion.
Our data shows that this month, two top-level insiders at Matas A/S have purchased stock. On July 3, CFO Per Johannesen Madsen bought 20,000 shares at a price of DKK 100.8 per share. Then, on July 4, Chairman Lars Vinge Frederiksen picked up 9,864 shares at a price of DKK 100.1 per share. Combined, the two insiders spent around DKK 3.0 million on stock (approx. $440K).
Both insiders have significantly increased the size of their holdings with these trades. Mr. Madsen’s purchase has taken his holding from 15,000 shares to 35,000 shares – an increase of around 133%. Meanwhile, Mr. Frederiksen’s trade has taken his holding from 19,095 shares to 28,959 shares – an increase of around 52%. This suggests that they are very confident that the stock is set to move higher.
Rising Free Cash Flow
Matas saw a strong finish to its most recent financial year, which ended on March 31, 2023.
While revenue growth for the full year was only up 3.3% year on year, growth for the final quarter was up 8.3%.
This wasn’t the only positive in the company’s full-year results, however. Another was free cash flow. For the year, free cash flow rose to DKK 423 million versus DKK 279 million a year earlier – an increase of 52%.
Looking ahead, management believes that logistics investments it is making now will drive long-term growth. For the current financial year, it expects organic revenue growth of 3-6%.
In light of this outlook, we see the insider buying here as a bullish development.