There are two main reasons insiders invest in their own companies. They either believe that business is about to get better, or that the company is undervalued. Whatever the reason, insider buying tells us that those within the organization expect its share price to rise.
In this report, we are going to highlight insider buying at AutoNation Inc (AN:US). AutoNation is an automotive retailer that operates in the US. Founded in 1996, it currently has over 300 retail outlets across the country. The company is listed on the New York Stock Exchange and has a market cap of approximately $6.80 billion at present.
Large CEO Stock Purchase
Our insider transaction data shows that on June 8, AutoNation’s CEO Mike Manley purchased 7,000 AN shares at an price of $144.89 per share. This trade cost the insider approximately $1.01 million and increased his holding to 22,277 shares.
Mr. Manley has considerable industry experience. Prior to joining AutoNation in November 2021, he served as Head of Americas for Stellantis NV, one of the largest automotive original equipment manufacturers in the world. Before this, he was CEO of Fiat Chrysler Automobiles N.V. a predecessor to Stellantis NV.
What stands out here is that the insider has increased the size of his holding by around 45% with this trade. This suggests that he is very confident the stock is set to move higher.
AutoNation stock is in a strong uptrend right now. Over the last three years, it has climbed from around $40 to near $150.
The stock still has a very low valuation, however, Currently, the forward-looking price-to-earnings (P/E) ratio here is just 6.4 – well below the market average.
It’s worth noting that AutoNation’s recent results have been solid. For the first quarter of 2023, for example, the company generated record earnings per share of $6.07, up 5% year on year, and cash flow from operations of $510 million. This cash flow allowed the company to buy back 2.4 million shares of common stock during the quarter.
"Our first quarter results demonstrate the resiliency of our operations and the benefits of a diversified business model,” commented Mr. Manley. “Consumer demand for personal vehicle ownership remains strong,” he added.
In light of the low valuation here, we see the insider buying as a bullish development.