Much like stocks, insider buying activity has dropped the last few weeks. Last week was as slow as we can remember. During the post-COVID rally, a lot of corporate insiders used selloffs as opportunities to buy their stock on the cheap before the rebound. That didn’t happen last week.
Bed Bath & Beyond Inc. (BBBY) was the only name on the thin roster of inside buys where it looks like executives went bargain shopping. Four C-Suite types and a director purchased 40,195 shares, investing $556,645 together. It was the second wave of insider buying for Bed Bath & Beyond in the last two months. A trio of insiders acquired 50,000 shares, spending $982,100. (1)
In the last nine years, there were 10 insider buys, nine of them in the last two months. Since 2013, Bed Bath & Beyond insiders collected $282 million in proceeds from sales versus just a little more than $3 million in buys, all in the last six months.
Based on our view of Bed Bath & Beyond’s stock chart, shares could be on the move higher this time around. BBBY has been in a downtrend since late November, staying below the trendline the entire time, until last Friday. For the first time in two months, the home goods retailer’s stock price closed above the descending line of resistance. Breaking a trend can be the first signal that a stock is about to reverse course, pivot higher in this case.
On the fundamental side, Wall Street believes the consumer cyclical company will lose 11 cents this year but rebound to a profit of $0.74 in 2023. Meanwhile, revenue is slated to slip 14% in 2022 and another 1.6% next year. (2) It’s no wonder the stock struggled, and Wall Street doesn’t expect much any time soon from BBBY shares with a 12-month price target of $14.35. (3)
In the last five years, investors valued BBBY shares at an average of 16.96 times earnings (P/E), which is nearly identical to its peer group average P/E of 16.98. Although it’s a long way from here, if the specialty store hits Wall Street’s 2023 consensus earning per share (EPS) of $0.74 and trades at 17 times the bottom line, the stock would price out at $12.58. That’s considerably lower than where BBBY is today ($15.46) and the 12-month target of $14.53.
However, during the last half-decade, earnings declined by an average or 28.63% with the average P/E of 16.96. During the next five years, Wall Street believes EPS will climb by an average of 53.3%. That means Bed Bath & Beyond’s P/E could have some upside to it. In fact, BBBY’s price to earnings ratio peaked at 53.63 during the last five years.
The recent wave of insider buying could be a sign that executives see value in BBBY shares at its current price level. Bed Bath & Beyond Inc.’s (BBBY) stock chart suggests the retailer’s stock could have some upside in the near term, provided the overall market cooperates. Longer term, stagnate sales could put a lid on BBBY’s potential.
In our view, Bed Bath & Beyond is only appropriate for short-term/swing traders or investors with a time horizon of at least two years, probably more. Those who trade BBBY in the short-term might consider limiting losses with a close below the 52-week low of $12.51.
1 – https://www.secform4.com/insider-trading/886158.htm
2 – https://finance.yahoo.com/quote/BBBY/analysis?p=BBBY