Stocks went down and insider buying went up. As bears took command of the markets for the most part of last week’s trading, corporate insiders took the opportunity of lower prices to snap up stock at the fastest pace we’ve seen in 2021.
There was a load of six and seven figure buys, cluster purchases, and change of heart transactions. Insiders from nearly 200 companies headed to the market to acquire their stocks. One stood out.
Four executives from Arconic Corporation (ARNC) purchased a combined 19,900 shares for a total investment of $447,877. (1) Arconic manufactures and sells aluminum sheets, plates, extrusions, and architectural products in the United States, Canada, China, France, Germany, Hungary, Russia, and the United Kingdom.
Chief Executive Officer (CEO) Timothy Donald Myers, Chief Financial Officer (CFO) Erick Asmussen, Vice President (VP) Melissa Miller, and Director Frederick Henderson were all buyers. In our universe, that’s called a cluster purchase.
The CEO and CFO trades come to our attention because Myers’ action is the first on the buy side after selling more than $1.2 million since 2017. (2) Meanwhile, Asmussen has ridden the ARNC horse once before, buying shares in May 2020 at $9.94. (3) As we type, the stock is at $25.27.
You can now add a change of heart and a previous winner to the cluster of Arconic Corporation’s insider buying with a purpose list. Perhaps the quartet was value hunting as the aluminum maker’s shares were riding a slide from $31ish to the low $20s since the start of the year.
According to the industry average price to sales (P/S) ratio, Arconic appears to be a value. The peer trades at 0.59 times sales; whereas ARNC exchanges hands at forty-eight cents on the dollar. Maybe, ARNC can close the value gap in the next 12-18 months.
Wall Street sees significant earnings and sales growth in 2022 with earnings per share (EPS) rising to a consensus $2.75 per share in from $1.95 this year. Moving up the income statement, analysts forecast sales increasing 9.1% to $7.22 billion next year, up from $6.62 billion in 2021.
Should management deliver on The Street’s expectations, if the stock trades at the industry average P/E of 39.19 and average P/S ratio, then we arrive at potential price targets of $76.30 and $39.08, respectively. Both numbers are higher than the analysts’ one-year price target of $36.33. (4)
Overall: Arconic Corporation (ARNC) insiders hit three of our favorite insider buying angles. They jumped into the industrial company’s shares near the short-term low. Wall Street’s price target forecast potential has an upside of 43.77%. It could be a little bit more if investors were willing to pay the industry average for price to sales. Shares would be considerably more attractive should the metal company be rewarded with the same price to earnings ratio as its peer group.
Investors looking to add industrial exposure and have a stomach for volatility might consider Arconic Corporation (ARNC).
1 – https://www.secform4.com/insider-trading/1790982.htm
3 – https://www.secform4.com/insider-trading/1103917.htm
4 – https://finance.yahoo.com/quote/ARNC?p=ARNC