Stock market

An insider just bought £63,965 of this FTSE 250 stock!

Image source: Getty Images

On May 30, the man in charge at this no FTSE 250 Legend bought around £64k ​​of the company’s stock. Giles Wilson was the only one in that position. Dr. Martins (LSE:DOCS) for three days before deciding to show his confidence in his new employer.

Transactions like these always make me sit up and take notice.

As American investor Peter Lynch once said:Insiders can sell their shares for any number of reasons, but they buy them for only one reason: they think the price will go up.

Is it a good time to join?

However, since entering the stock market in 2021, Dr Martins has issued five profit warnings. Wilson’s purchase suggests he believes there won’t be a sixth.

And I agree. That’s because on May 16, the company released its most disappointing news of commercial updates.

For the year ending March 31, 2025 (FY25), it said a “Worst case scenario”, its pre-tax profit could be about a third of its FY24 level.

While sales are down across all regions, the company is struggling the most in the US. During FY24, revenues in the US were down 23.9% compared to FY23.

area FY 23 (£m) FY 24 (£m) Change (%)
Europe, Middle East and Africa 443.0 431.8 -2.5
United States 428.2 325.8 -23.9
Asia Pacific 129.1 119.5 -7.4
yesterday 1,000.3 877.1 -12.3
Source: Company Accounts

But I wonder if the company has decided to be overly cautious in trying to avoid issuing another profit warning. It sounded more optimistic when he said:There are also situations where the profit result can be significantly better than this.

Perhaps it’s a case of under-promising and over-delivering?

Doom and gloom

However, with both sales and earnings falling, its gross profit margin shrinking and net debt rising, it’s hard to make a compelling case for investment.

And there’s no guarantee that the company’s turnaround plan will work.

Also, income investors will be disappointed that the company recently cut its dividend. Going forward, it expects to return 35% of profits to shareholders. At the lower end of expectations, this could mean paying less than a penny a share.

Reasons to be optimistic

However, I remain positive about the company’s prospects. With its distinctive design and long heritage, the Dr. Martens brand is a valuable brand. And the company claims that brand recognition is growing in its key markets.

According to Straits Research, the global footwear market will reach $568bn by 2031. With revenues of £1bn in FY24, there is plenty of scope for international expansion for the British icon. To do this, the company plans to spend heavily on marketing and promotional activities.

It also has a new chief executive, Ije Nwokorie, a former director. applewho will want to demonstrate their credentials.

But as I’m tempted to invest, I think I’ll wait in a few months time before assessing the situation. This is because the company has historically performed better during the second half of its financial year.

Directors have warned that the first half of FY25 will see a 20 per cent drop in group revenue.Cost speed“It says that the year’s earnings will be”Many other half-weightsIf this proves true, investors may not react when the results for the six months ended September 30 are published.

So I’m going to keep Dr. Martins on my watch list and take another look at the end of the year.


Source link

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button