A filing with the SEC revealed that an insider at Unifi bought nearly $600k worth of stock on Tuesday. While not a huge sum, this transaction is newsworthy when considering who is buying as well as the stock’s low valuation.
Insider Buying: Unifi
Robert Bishop sits on the board of Unifi, Inc. (NYSE: UFI) and is the founder and CEO of Impala Asset Management which has $2.3 billion assets under management (AUM). Prior to Impala, Bishop served as the Chief Investment Officer at Soros Fund Management overseeing the Quantum Endowment Fund. He clearly has solid credentials.
A recent filing showed that he bought 17,178 shares on Tuesday, February 6th. Bishop has bought $2.0 million worth of stock since the beginning of November as shown below.
|Insider Trading||Relationship||Date||#Shares||Value ($)|
|Robert Bishop||Director||Feb 06||17,178||$597,966|
|Robert Bishop||Director||Feb 05||16,000||$562,400|
|Robert Bishop||Director||Feb 02||13,329||$470,514|
|Robert Bishop||Director||Nov 30||5,742||$209,755|
|Robert Bishop||Director||Nov 09||5,427||$188,643|
Unifi’s Stock Price and Valuation
The company’s shares last traded at $35.05 as of Thursday, approximately 89.4% of its 52-week high. The stock is up 31.1% over the last year but roughly flat over the prior 3 years. Could the recent insider buying indicate that shares are ready to break out?
According to Impala’s website site, the firm invests in global cyclical equities by applying an investment process that combines deep, bottom-up research. Therefore, the fund’s analysts are likely looking at the same fundamental analyses presented below.
A number of future cash flow and peer multiple valuation analyses exhibit Unifi’s big upside potential.
|Analysis||Model Fair Value||Upside (Downside)|
|10-yr DCF Revenue Exit||$45.73||30.5%|
|5-yr DCF Revenue Exit||$43.65||24.5%|
|Peer Revenue Multiples||$53.99||54.0%|
|10-yr DCF EBITDA Exit||$44.54||27.1%|
|5-yr DCF EBITDA Exit||$42.11||20.1%|
|Peer EBITDA Multiples||$37.63||7.4%|
|Peer P/E Multiples||$35.31||0.7%|
Finbox.io applies pre-built valuation models to calculate a stock’s fair value. The company’s average fair value of $43.28 implies 23.5% upside which is calculated from 7 separate analyses as shown in the table above.
While insider activity on its own is not necessarily a buy or sell signal, it may offer insight into how ownership and management feel about a company’s future prospects.
One of the greatest investors of all time, Peter Lynch, was noted as saying that:
Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.
However, keep in mind this is only one aspect of researching stocks and that there are other important items to consider. I recommend you continue to analyze Unifi to gain a more comprehensive view of the company by looking at:
Valuation: what is Unifi’s free cash flow yield and how does it compare to its publicly traded peers? It measures the amount of free cash flow for each dollar of equity (market capitalization). Analyze the free cash flow yield here.
Risk Metrics: what is Unifi’s Altman Z score? It’s a famous formula used to predict the probability that a firm will go into bankruptcy within two years. View the company’s Altman Z score here.
Efficiency Metrics: is management becoming more or less efficient in creating value for the firm? Find out by analyzing the company’s return on invested capital ratio here.
Author: Matt Hogan
Expertise: Valuation, financial statement analysis
Matt Hogan is a co-founder of finbox.io. His expertise is in investment decision making. Prior to finbox.io, Matt worked for an investment banking group providing fairness opinions in connection to stock acquisitions. He spent much of his time building valuation models to help clients determine an asset’s fair value. He believes that these same valuation models should be used by all investors before buying or selling a stock.
Matt can be reached at firstname.lastname@example.org.
As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.