It was another week of disregarding nearly all insider buys as most were habitual, secondary offering, institutional and small buys. There was one company, however, that met a couple of our insider buy with purpose criteria.
- A positive track record
- A change of heart
- Multiple insiders buying simultaneously
REV Group, Inc. (REVG) Chief Financial Officer (CFO) Mark Skonieczny, Jr. and Chief Human Resources Officer (CHRO?) Christopher Daniels bought a combined 20,500 REV shares for a combined $186,290. (1) It’s not a lot of money by insider buying standards, but dollars don’t always tell the whole story.
So you know, REV Group designs, manufactures, and distributes specialty vehicles for Fire/Ambulance, School Busses, and RVs.
Skonieczny, Jr.’s insider history was nothing but option related and one sale of Adient plc (ADNT), dating back to 2016. (2) Parting with his money speaks for itself, especially when you consider he spent $136,350. By far, it is his largest transaction. Although, as mentioned up top, it’s not the most money spent last week, it’s huge relative to all of CFO’s previous history. We identify that as a change of heart buy.
Meanwhile, Daniels checks the previous history box. Much like his REVG colleague, the Human Resources Officer’s history is limited, mostly optioned related with a REV Group buy on March 27, 2020 at $4.45. (3) That’s about $1 above the 52-week low of $3.50. In less than a year, the specialty vehicle make is more than 100% higher, $9.13 as of the close of business on January 15, 2021. Now, Daniels purchase is about $2 dollar below the 52-week high of $10.89.
Experience hints at insiders who expect good things to come and Wall Street sees positives on the earnings front. The analysts covering the company forecast consensus earnings per share (EPS) of $0.62 for this year, up from $0.15 in 2020, and $0.93 in 2022. That’s some serious bottom line growth but it appears to be more from profit margin recovery than growing revenue. The top line is forecasted to grow 3.5% in 2021 and 2.9% next year. (4)
Sales growth or not, Daniels and Skonieczny, Jr. could make solid profit if REVG hits the Street’s bottom-line expectations. In the last five-years, the vehicle maker traded with an average price to earnings (P/E) ratio of 40.82. At the five-year average P/E and 2021’s EPS consensus, shares would pop to 25.31, probably not going to happen. Instead, let’s consider the peer group’s average P/E of 27.67, which translates to a potential price target of $17.16. Our look at REVG’s stock chart shows $14 and change at as resistance and a potential technical price target in the next 12-18 months. Along with potential upside, REV Group has a dividend yield of 4.68%.
Overall: REV Group, Inc. (REVG) appears to offer investors an attractive combination of growth and income. The pair of insider purchases adds weight to investor optimism considering their limited history. REV could be appropriate for growth and income investor with a medium to high risk tolerance.
1 – https://www.secform4.com/insider-trading/1687221.htm
2 – https://www.secform4.com/insider-trading/1683536.htm
3 – https://www.secform4.com/insider-trading/1497132.htm
4 – https://finance.yahoo.com/quote/REVG/analysis?p=REVG