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What do Recent Insider Trades in GMS Stock Signal?
Stock Analysis & Ideas

What do Recent Insider Trades in GMS Stock Signal?

Story Highlights

Despite a challenging business environment, a large stakeholder of GMS recently accumulated additional shares in the company, reflecting optimism in its future prospects.

Shares of GMS Inc. (NYSE: GMS) have been rising since the company announced its results for the fourth quarter of the fiscal year ended April 30, 2022 last week. GMS is a leading North American distributor of specialty building products like wallboard, ceilings, steel framing, and complementary construction products.

GMS’s Q4 FY22 revenue increased 38.2% to $1.29 billion, surpassing analysts’ consensus estimate of $1.26 billion. The company cited higher pricing, “healthy” residential end-market demand, robust performance of its complementary products, and the acquisitions of Westside Building Material and AMES Taping Tools as the reasons for solid revenue growth.  

Further, adjusted EPS jumped to $2.09 from $1.07 in the prior-year quarter and significantly exceeded analysts’ estimate of $1.88.   

Despite the rise in the stock triggered by the recent results, GMS shares are still down 26% year-to-date.  

Insider Trades

As per a recent SEC filing and TipRanks’ Insider Trading Activity tool, Coliseum Capital Management, LLC, a shareholder with greater than 10% stake in GMS, bought shares worth $7.6 million. This Informative Buy transaction comprised a purchase of 93,897 shares at $38.72 on June 22, and 100,000 shares at $39.82 on June 23, the day Q4 results were announced.

Informative Buy transactions reflect insider confidence in the company’s growth prospects.

Overall, insiders have bought shares worth $26.8 million in the last three months, leading to a Positive Insider Confidence Signal for GMS stock, based on five informative insider transactions over the last three months.  

Wall Street’s Take

Following the print, Raymond James analyst Sam J. Darkatsh lowered the price target for GMS stock to $70 from $72, and maintained a Buy rating.

Darkatsh highlighted that GMS trades at a double-digit free cash flow yield, has witnessed recent insider buying with expanded repo authority, has a “drama-free” balance sheet, and an extensive runway of demand that will help maintain volumes over the near term.

However, Darkatsh adds that a lack of upcoming catalysts tempers the bullish stance.

Overall, the Street is cautiously optimistic on GMS stock with a Moderate Buy consensus rating based on four Buys and two Holds. The average GMS price target of $54.50 implies 22.72% upside potential from current levels.

Conclusion

Despite uncertainties in the broader economy and the housing market showing signs of cooling down, GMS continues to be positive about its near-term outlook thanks to a solid backlog of residential demand. Meanwhile, insiders are taking advantage of the year-to-date pullback in the stock to build their positions, thus reflecting their optimism about the company’s future prospects.

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