Director buys can be a sign that those with the most insight into a company view its shares as undervalued. We take a look at four ASX shares with recent director buys.
What is insider buying?
Insider buying is the purchase of shares in a company by an officer or executive of that company, such as a director. Insiders usually have insights into the companies they manage and are more likely to purchase shares when they view them as undervalued.
Insiders must only buy based on publicly available information and must inform the ASX of the trade by lodging an Appendix 3Y. Depending on the circumstances, the purchase by an insider of shares can be seen as a vote of confidence in a business. Buys by multiple insiders can act as a stronger signal, as can larger, rather than smaller, share purchases.
Which ASX shares have had recent director buys?
We have studied recent insider buys to bring you four ASX shares with recent insider buys.
Zip Co Ltd (ASX: Z1P)
Two Zip Co directors acquired shares in the company this month. Zip is a buy now, pay later (BNPL) provider with 5.7 million customers. The Zip share price was trading as high as $13.92 last month but has fallen by around 46% since and is currently trading around $7.35. The company released its half-year results in late February reporting record transaction volumes of $2,320.6 million, a 141% year-on-year increase.
Zip Co earned revenue of $160 million for 1H FY21 with more than 38,500 merchants across the United States, Australia, New Zealand, and the United Kingdom. During the half, Zip completed its acquisition of Quadpay, accelerating growth in the US. The company also raised $176.7 million via an oversubscribed placement and share purchase plan. According to managing director and CEO Larry Diamond, the December half was transformational, and saw Zip position itself as a “truly global BNPL leader.”
As of December, Zip was annualising over $7.5 billion in transaction volume with strong momentum as it expands in the US and launches in the UK. Diamond says global BNPL adoption remains in its infancy, with penetration of global e-commerce spend only 1.6%. Zip is looking to accelerate growth across the globe in FY21 with a strong pipeline of retail partnerships.
Ardent Leisure Group Ltd (ASX: ALG)
Two Ardent Leisure directors bought shares in the company early this month. Ardent Leisure is the company behind Dreamworld and White Water World and also runs a bowling entertainment business with 43 venues in America. The Ardent Leisure share price has bounced in March, gaining 49% over the month to trade above 90 cents. The company released its half-year results at the end of February which were significantly impacted by COVID-19. But the roll-out of the COVID-19 vaccine, which is gathering pace, offers cause for optimism.
During 1H FY21 revenue fell 44.3% as trading and travel restrictions resulted in reduced visitation to venues. Dreamworld and WhiteWater World were closed until mid-September 2020. They have since reopened and seen a shift in sales in favour of annual passes as access to international and interstate markets remains restricted. Attendance between reopening and late January was approximately 70% of the prior corresponding period, which is considered a good result given the restrictions. Nonetheless, Ardent Leisure finished 1H FY21 with a net loss after tax of $83.6 million.
The company has warned that 2H FY21 trading is expected to be challenging due to ongoing uncertainty associated with COVID-19 and the end of the JobKeeper subsidy. But the vaccine program has improved the outlook and Ardent says it is ready to accept the challenges of the changing landscape.
Sonic Healthcare Limited (ASX: SHL)
Three Sonic Healthcare directors have acquired shares in the company this month. Sonic Healthcare is a healthcare provider with specialist operations in pathology and laboratory medicine, radiology, general practice and corporate medical services. The Sonic Healthcare share price hit a low of $30.55 on 10 March, but has since rallied and is now trading above $35.
Sonic Healthcare released its half-year results in mid-February which revealed revenue growth of 33% for the year ended 31 December 2020. The healthcare provider reported a statutory net profit for the half-year of $678 million on revenues of $4.4 billion. The strong financial results reflect the millions of COVID-19 tests performed as part of combating the pandemic. The laboratory division achieved organic revenue growth of 39% while the imaging division grew revenue by 14%, higher than long-term industry averages.
Prospa Group Ltd (ASX: PGL)
Two Prospa Group directors have acquired shares in the company this month. Prospa Group is an online small business lender that listed on the ASX in 2019. The Prospa share price has been largely flat this year although the lender reported strong growth in originations in 1H FY21. This is a recovery from FY20 when loan originations fell due to the challenging economic conditions brought on by the COVID-19 pandemic.
FY20 loan originations were $450.9 million, down from $501.7 million in FY19. But volumes have since picked up with originations increasing 265.3% from 4Q20 to 1Q21 and a further 25.9% from 1Q21 to 2Q21. 1H21 loan originations of $180.7 million remain below pre-pandemic levels, down 41.1% on the prior corresponding period. Prospa, however, says recovery is accelerating with December and January origination volumes reaching 69% and 75% of the prior corresponding periods.
While a single director buy may not be telling, several can provide a good indication that those best placed to know consider shares good value. These four ASX shares all had multiple director buys in March which could indicate an optimistic outlook.
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Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia has recommended Sonic Healthcare Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.