The stock price moved 80% in a little more than six months the last time CalAmp Corp. (CAMP) Chief Executive Officer (CEO) Jeffery Gardner purchased shares. On July 16, 2016, the technology company’s head honcho bought a modest 1000 shares at $14.11. (1) CAMP hit $25.45 on January 26, 2018.
Mr. Gardner is back at it. He’s purchased 7500 shares in a pair of buys since May 8, 2020. In total, he put $50k into the company he runs between $6.41 and $6.75. Compare his investment to his reported $60,000 a year salary. $50,000 is a big deal, although we suspect his compensation is limited by choice. Nonetheless, his July 2016 transaction shows dollar amount doesn’t matter.
The CEO’s activity runs counter to Wall Street’s view on profitability in 2021. In the last 90-days, earnings pers share (EPS) estimates slid from $0.69 per share to $0.31. That’s down from this year’s consensus projection of $0.43. While EPS are forecasted to nosedive 28%, revenue is slated to slip just 5.8% from $364.86 million in 2020 to $343.73 million.
Gardner will want investors to pay more attention to sales than profits during the next 18-months or so. Based on the CAMP’s five-year price to earnings (P/E) ratio high of 22.68, shares would top out at $7.03 using 2021’s consensus EPS estimate of $0.31. It’s our opinion that it’s highly doubtful the CEO paid as much as $6.75 in hopes the stock would climb to $7.03.
If we move to the topline, Gardner and shareholders could be much happier. In the last half-decade, CalAmp Corp traded from 0.37 to 2.73 times sales (P/S) with an average of 1.73. At the low end of the five-year history and 2021’s expected revenue of $343.73 million, CAMP would nearly be cut in half to $3.70, not a happy outcome.
But… investors at current levels would be all smiles if the cloud and telematics systems company traded at its five-year average price to sales ratio of 1.73, a price target of $17.32. They and the CEO would be outright giddy at the five-year high P/S ratio of 2.73 and the corresponding price of $27.33.
In the last 52-weeks, CAMP has traded as low as $3.70 and as high as $12.32. The street sees a one-year price target of $10.09. To meet the 12-month number, CalAmp would need to expand its P/E history and trade at 32.55 times EPS. Meanwhile, the P/S ratio of just 1 is required to hit $10.09.
Looking at CAMP’s stock chart, $10 and change could prove to be like the third bowl of porridge, just about right. Prior to the COVID-19 crash, shares spent the majority of 2020 trading around $10. If buyers can carry the stock past the ten spot, then $12 could come into focus. Bust $12 and $14 would be the next level up.
Conclusion: At $10.09, investors would gain $2.37 based on its current price of $7.72. Meanwhile, downside to the 52-week low is $4.02. From our standpoint, a 1 to 2 reward to risk ratio is something we would never do. However, based on CEO Jeffery Gardner’s insider buying history, speculative investors might consider the tech company and hope for the best, but to be prepared for the worst.