The Third Time Another Charm For This CEO?

It’s always amazing how fast a year goes by. It never feels that way, but when the calendar flips from year to year, the past 365 days seem to be a blur. We heard a spot-on way to describe how times passes, “the days crawl, but the years fly.”

How true.

This is our last insider buy with a purpose for 2021. Hopefully, when we look back in 12 months, the stock crawled much higher and COVID will be a thing of the past; fingers crossed!

American Woodmark Corporation (AMWD) Chief Executive Officer (CEO) Mr. M. Scott Culbreth appears to have a knack for selling his company shares high and buying them lower. Selling 4,000 shares of AMWD in mid-2017 at $95.20 for $380,800 was Culbreth’s first activity with American Woodmark Corporation. About 15 months later, the CEO switched hats from seller to buyer, taking ownership of 600 shares at $61, spending $36,000. It’s not much, we know, but does provide a comparison for a little later in our story.

Less than a year after his buy, Culbreth returned to a seller’s role, unloading 2,467 shares at $95, banking $234,365 in October 2019. Now it’s time for the comparison we mentioned at the end of the last paragraph. Last week, the Chief Executive bought 2,000 shares of AMWS at $57.95 for nearly $116,000, more than tripling his only other buy. So far, Culbreth sold twice when AMWD hit the mid-$90s and bought a couple of times in the neighborhood of $60. (1)

American Woodmark is one of the nation’s largest cabinet manufacturers. Their products are distributed via partnerships with major home centers, builders, independent dealers, and distributors. Wall Street analysts don’t think he’ll have a chance to sell the cabinet maker in the mid-$90s in 2022 as they have a one-year consensus price target of $80.91. (2) But, that’s still almost 30% higher than where shares trade as we type, $62.59.

Things could go better than analysts predict in the year ahead. During the company’s most recent earnings conference call, Culbreth told listeners, “We will improve margins in fiscal year ’22. I shared last quarter that we were announcing additional pricing actions and those are now complete. After realizing approximately $3 million of impact in the first quarter of fiscal 2022 for pricing, that impact grew to approximately $14 million in the second quarter. At our current sales levels, we expect the impact of our confirmed pricing actions to increase to over $35 million in the third fiscal quarter and over $50 million in the fourth fiscal quarter. (3)

As it stands now, the Street forecasts earnings per share (EPS) of $7.07 next year, up from $6.40 in 2021. (4) Currently, investors value AMWD at 15.3 times earnings (P/E) compared to 11.98 for the typical competitor. If the Consumer Cyclical company keeps its P/E and meets 2022’s earning expectations, then the stock would trade at $108.17. Using the industry’s price to earning ratio would put shares at $84.70, a touch higher than the 12-month consensus price target.

Overall: American Woodmark Corporation (AMWD) appears to offer shareholders attractive upside potential without needing a nosebleed P/E ratio. If management can deliver on Wall Street’s earning expectations, Chief Executive Officer Culbreth could possibly have a third opportunity to sell at more than $90 per share.

With a beta of 2.17, AMWD is considered twice as volatile as the S&P 500, making it only appropriate for investors with above-average risk tolerance.

 

1 – https://www.secform4.com/insider-trading/1601006.htm

2 – https://finance.yahoo.com/quote/AMWD?p=AMWD

3 – https://www.fool.com/earnings/call-transcripts/2021/11/23/american-woodmark-corporation-amwd-q2-2022-earning/

4 – https://finance.yahoo.com/quote/AMWD/analysis?p=AMWD