ew form 4 filings with the SEC have revealed that Lawson Products, Inc. (NDAQ:LAWS) insiders have been buying large quantities of stock since February 28th. With shares down -11.6% in the last year, it’s worth taking a closer look at the company.
Insider Buying: Lawson Products, Inc.
Two separate insiders have been buying shares of Lawson Products according to filings with the SEC including Michael DeCata (President and CEO) and Luther King Capital (10% owner). Total insider buying has totaled $5.4 million since February 28th which is approximately 2.5% of Lawson Products’ total market capitalization.
|Insider Trading||Relationship||Date||#Shares||Value ($)|
|Luther King Capital||10% Owner||Mar 02||125,000||$3,000,000|
|Michael DeCata||President and CEO||Mar 02||900||$21,395|
|Michael DeCata||President and CEO||Mar 01||942||$22,127|
|Luther King Capital||10% Owner||Feb 28||100,000||$2,400,000|
Luther King Capital Management is an employee owned investment manager. According to its website, the firm invests in high-quality businesses that it believes will produce consistent, repeatable and, ultimately, superior risk-adjusted returns for its clients.
Founded in 2007 by Dov Gertzulin, DG Value is a value-focused investment firm. The firm runs two primary investment strategies, the diversified DG Value Funds and the concentrated DG Concentrated strategy. Q3 2021 hedge fund letters, conferences and more The flagship DG Value Fund was launched in 2007, specializing in middle-market distressed situations and event-driven Read More
Its investment philosophy is grounded in the fundamental analysis of companies that meet its investment criteria, such as market dominance, high or rising returns on invested capital, strong cash flow characteristics and a sound balance sheet.
Taking a closer look at Lawson’s fundamentals helps explain why Luther Capital now owns 2.45 million shares which represent more than 25% of the total shares outstanding.
Why Are Insiders Buying Shares?
Lawson Products distributes products and services to the industrial, commercial, institutional, and government maintenance, repair, and operations marketplace in the United States, Puerto Rico, Canada, Mexico, and the Caribbean. The company was founded in 1952 and is headquartered in Chicago, Illinois.
Although significantly smaller, comparable public companies include W.W. Grainger, (NYSE: GWW), MSC Industrial Direct Company, (NYSE: MSM), EnviroStar, (NYSEMKT: EVI) and WESCO International, (NYSE: WCC). Analyzing Lawson Products’ valuation metrics and ratios relative to its peers offers further insight into why insiders may be buying their shares.
Debt to Capital measures a company’s current capital structure, financial solvency, and degree of leverage. The higher the percentage, the more debt the company has in its capital structure and the lower the equity cushion.
It appears the company does have a strong balance sheet relative to its peers. Lawson Products’ debt to capital ratio of 3.0% is below the majority of its comparable companies as shown below.
Analysts often look at Price to Book Value multiples to help determine how much to pay for a given stock. The company’s price to book value of 2.9x is only above WCC (1.4x) and below GWW (7.6x), MSM (3.9x), EVI (11.8x).
Lawson Products Valuation
The company’s shares last traded at $24.70 as of Monday, down -11.6% over the last year. While the stock has stagnated, the recent insider transactions could signal a promising road ahead for shareholders.
In addition, finbox.io’s average fair value estimate of $29.99 implies 21.4% upside and is calculated from 9 valuation models as shown in the table below. Each analysis uses consensus Wall Street estimates for the projections when available.
|Analysis||Model Fair Value||Upside (Downside)|
|10-yr DCF Revenue Exit||$35.35||43.1%|
|5-yr DCF Revenue Exit||$38.60||56.3%|
|10-yr DCF EBITDA Exit||$34.58||40.0%|
|5-yr DCF EBITDA Exit||$37.44||51.6%|
|Peer EBITDA Multiples||$21.09||-14.6%|
|10-yr DCF Growth Exit||$26.56||7.5%|
|5-yr DCF Growth Exit||$25.48||3.2%|
|Peer P/E Multiples||$20.04||-18.9%|
|Earnings Power Value||$30.80||24.7%|
While executives are always happy to tell you all the reasons why their stock is a buy, their actions can tell a different story about the company’s future prospects. A trend of buying activity may indicate that insiders think the stock is going up over the upcoming time period, and are trying to buy before the price rises.
Keep in mind that insider activity is only one aspect of stock research and that there are other important items to consider. I recommend you continue to research Lawson Products to get a more comprehensive view of the company’s fundamentals by looking at:
Valuation: what is Lawson Products’ free cash flow yield and how does it compare to its publicly traded peers? This metric measures the amount of free cash flow for each dollar of equity (market capitalization). Analyze the free cash flow yield here.
Efficiency Metrics: return on equity is used to measure the return that a firm generates on the book value of common equity. View Lawson Products’ return on equity 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.
Forecast: what is Lawson Products’ projected EBITDA margin? Is the company expected to improve its profitability going forward? Analyze the company’s projected EBITDA margin here.
Author: Brian Dentino
Expertise: financial technology, analyzing market trends
Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors.
Brian can be reached at [email protected]
As of this writing, Brian did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.