A FTSE director just invested £100k in this stock

Company directors have more information about their business than anyone else. Therefore, the merchandise must be monitored. Recently, I was spotted buying a substantial directorship in a FTSE 250 digital transformation company Price (LSE: KNOS). Here is a look at the trade in more detail.

£100k to buy a director

Regulatory filings show that on December 20, Kainos director Katie Davis acquired 6,400 KNOS shares at £15.64 per share. This trade is worth over £100k.

I think this trade is quite interesting for several reasons. First, Davis – who has been on the board of Kainos for more than three years – has a background in digital transformation. Previously, he served in the Cabinet Office where he was responsible for delivering large-scale IT-enabled change. Given his background, he may have a good understanding of the company’s prospects.

Second, they have invested heavily in Kainos stock. While this director’s purchase is not huge by global terms, it is relatively large by UK standards. In my view, the fact that he has invested £100k of his own money in the company shows that he is very confident in Kainos’ growth prospects and that he expects the share price to rise.

My thoughts on stocks

Now I already own some Kainos shares. But after this trade, I was tempted to buy another one. Recent results show that the company has a lot of momentum right now.

For the six months to September 30, revenue rose 26% year-on-year to £180m while adjusted diluted earnings rose 15% year-on-year to 22p. At the end of September, the company’s contract backlog was £308m, up 23% year-on-year.

And management is very optimistic about the future. “Looking forward, we remain confident in our business because the demand for our services has never been higher,“said CEO Brendan Mooney. “The journey has just begun,” he added.

Strong finances

It’s not just the growth that impresses me here though. This is a company with a blue-chip customer base. Their customers are included Netflix, Booking.comHome Office, Cabinet Office, and NHS.

It is also a company with strong finances. The return on capital is high (meaning very profitable), the balance sheet is strong, and the company has a good record of dividend growth.

Overall, there is a lot to like about Kainos from an investment perspective.

premium price

On the downside, the stock price is quite high. Currently, the price-to-earnings (P/E) ratio is in the mid-30s. This leaves no margin for error. If future growth is weaker than expected, I expect the share price to drop.

But I like the price, because of the company’s quality attributes. I will be monitoring the stock with a view to buying more stocks for my portfolio.