12-month performance: -25% Insider activity: Bullish Insider buying pattern: Purchases from CEO and CFO Recent news: Solid Q2 results
Top-level corporate executives such as CEOs and CFOs tend to have an information advantage over other investors. If these insiders are buying company stock, it’s generally a bullish development.
Here, we are going to highlight recent CEO and CFO buys at Ribbon Communications Inc (RBBN:US). Ribbon Communications is a technology company that provides global communications software and network solutions to service providers, enterprises, and critical infrastructure sectors. It is listed on the NASDAQ Global Select Market and currently has a market capitalization of $579 million.
Ribbon Communications: insider buying
In August, both Ribbon’s CEO and CFO purchased RBBN stock on a number of occasions. Form 4 filings show that CEO Bruce McClelland made five purchases, acquiring a total of 40,000 shares, while CFO Miguel Lopez made three purchases, acquiring a total of 15,000 shares. These purchases increased McClelland’s holding from 85,575 shares to 125,575 shares, and increased Lopez’s holding from 0 shares to 15,000 shares.
Source: 2iQ Research
This pattern of insider buying looks interesting for a couple of reasons. Firstly, Ribbon Communications is a smaller company and studies have shown that insider buying at smaller companies, in general, tends to carry more weight than insider buying at larger firms. At smaller companies, the information advantage insiders have is enhanced.
Secondly, McClelland’s last few purchases have been timed well. The insider bought stock in March and May and since then, the stock has risen significantly.
Q2 revenue growth
Ribbon Communications issued a solid set of Q2 results in August. For the quarter, revenue was $210 million, up from $145 million in the second quarter of 2019. Meanwhile, non-GAAP Adjusted EBITDA rose to $30 million, up from $22 million the year before. "We are pleased with our second quarter financial results during these challenging times. Demand for our industry leading voice-over-IP real-time communications solutions was strong as service providers and enterprises continue to increase capacity to support work-from-home communication and collaboration needs, commented McClelland.
Putting this all together, we see the recent insider buying here as bullish. It suggests that the CEO and CFO are confident about the future and that they currently see RBBN stock as undervalued.
Disclaimer: Neither 2iQ Research GmbH nor its content providers are responsible for any damages or losses arising from any use of this information.
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