This week will be different than most. Lately, it’s been challenging to find one company with insider buying with purpose. This week we have two and they both follow the same pattern; insiders who normally sell are suddenly buying. We get into the buyers, their history, and potential price targets based on earning per share estimates (EPS) and sales forecasts.
Fiserv, Inc. (FISV) Director Denis O’Leary purchased 9100 shares at $110.99, investing a little more than $1 million. (1) The company provides financial services technology worldwide, such as account processing and digital banking solutions; card issuer processing and network services; payments; e-commerce; merchant acquiring and processing; and the Clover™ cloud-based point-of-sale solution.
O’Leary’s trading history with the fintech company is one-sided. Since 2009, he’s sold more than $57 million worth of FISV and bought twice for a total of $1.14 million. The last time he bought was in 2009 at $33.26 and spent most of his other trading time selling in the hundreds.
Considering his lopsided history and how well the FISV performed following the director’s previous purchase, one must wonder what he expects this time around as he upped his dollar amount by 10 times. Next year, analysts believe Fiserv will earn $6.39 per share on sales of $16.24 billion. (2) If the fintech company traded at its five-year average for price to earnings (P/E) ratio of 26.55 or price to sales ratio (P/S) of 5.47, the stock would trade at $166.65 or $132.80, respectively.
Nu Skin Enterprises, Incorporated’s (NUS) Chairman, Steven Lund’s story is very similar to Denis O’Leary’s, except Lund sold $56 million of NUS before buying $1 million at $48.05 per share last week. (3) He wasn’t the only to add shares; Director Daniel Campbell purchased $501,892 of Nu Skin at $50.64. Campbell has been less active than Lund, but his track record is good. (4)
The Director bought NUS In 2007 and 2008 around $17 and started to sell in 2010 at $31.76 and up to $126. Last week was his biggest buy and third largest of the seven. The pair pounced after NUS got rocked following its fourth quarter earnings report.
Shares opened at $62.69 on February 11th, the day after earnings and hit a low of $47.51 three days later. The duo didn’t waste any time jumping in Nu Skin, which develops and distributes a comprehensive line of premium-quality beauty and wellness solutions through a global network.
Once again, let’s use the five-year average P/E and P/S ratios along with 2022’s consensus EPS of $4.22 and sales target of $2.88 billion to get a sense of NUS’ possible potential. (5) During the last half decade, investors typically paid 16.99 times earnings and 1.25 times sales. The trusty calculator produces a price target of $71.69 by P/E and $70.64 by P/S. Either way, that’s about 40% upside from its current price of $49.59.
Conclusion: Fiserv’s Director (FISV) Denis O’Leary and Nu Skin Enterprises’ (NUS) Chairman Steven Lund’s trades were way out of character. Meanwhile, Director Daniel Campbell previously bought low and sold high. You also can’t ignore that all three made significant purchases.
While NUS appears to offer more potential upside than FISV based on historical valuations and 2022 earnings and sales expectations, both could be right for above average risk investors who see the trio of unusual insider buys as major positives.
1 – https://www.secform4.com/insider-trading/1253512.htm
2 – https://finance.yahoo.com/quote/FISV/analysis?p=FISV
3 – https://www.secform4.com/insider-trading/1033942.htm
4 – https://www.secform4.com/insider-trading/1184200.htm
5 – https://finance.yahoo.com/quote/NUS/analysis?p=NUS