2iQ Insider Brief: Aphria Inc(APHA CN) Evoqua Water Technologies(AQUA US) Pason Systems Inc (PSI CN)

Kaloyan Kolev 18 December 2018

Aphria Inc (APHA: CN) 

12-month performance: -45%
Insider activity: Bullish
Buying pattern: Large purchases from multiple directors including CEO, CFO and Co-Chairmen
Recent news: Targeted by short sellers

 Aphria is a Canadian company that is engaged in producing and selling cannabis. A Health Canada Licensed Producer (LP) of medical cannabis products, the company was the first public licensed medical cannabis producer to report positive cash flow from operations. The stock is listed on the Toronto Stock Exchange and currently has a market capitalisation of CAD $2.1 billion.

 

Shares in Aphria have had a volatile year. Starting the year above CAD $20 after a strong run in 2017, the shares fell to below CAD $10 in April as demand for cannabis stocks cooled amidst global stock market volatility. The stock then rallied to above $20 in September ahead of Canada’s recreational marketplace opening for business on 17 October, however, since then, Aphria has been targeted by short sellers, who have questioned whether the group overpaid for some of its recent Latam acquisitions, and its share price has plummeted back below CAD $8. Aphria has stood behind its Latam operations and in a statement earlier this month, it said the recent short-seller report was a “malicious and self-serving attempt to profit by manipulating Aphria's stock price at the expense of Aphria's shareholders." So, who should investors side with?

 Aphria

Source: 2iQ Research

What looks interesting to us here is that since early December, a number of top-level directors have been purchasing shares in the company, which suggests that management is confident about the future. We interpret this as a bullish signal. Those buying shares have included CEO Victor Neufeld, who purchased 120,000 shares, CFO Carl Merton, who acquired 3,300 shares, President Jakob Ripshtein, who bought 7,500 shares, and Co-Chairmen John Cervini and Cole Cacciavillani, who bought 117,200 shares and 120,000 shares respectively. Given that so many top-level insiders have bought shares after the recent share price fall, we believe the stock could be worth a closer look right now.

 

Evoqua Water Technologies (AQUA: US) 

12-month performance: -56%
Insider activity: Bullish
Buying pattern: Large purchases from multiple directors including CEO and CFO
Recent news: Lowered full-year guidance marginally

 Evoqua Water Technologies is a water treatment specialist that delivers products, solutions and services that ensure water quality and consistency. Evoqua’s advanced technologies, mobile and emergency water supply solutions, and service help cities across the world provide and discharge clean water, and enable companies across a range of industries to maximise productivity and profitability. The stock is listed on the New York Stock Exchange and currently has a market capitalisation of $1.2 billion.

 

Evoqua Water Technologies shares have fallen sharply recently after the group lowered its full-year guidance in late October. In an announcement on 30 October, the company advised that full-year sales are likely to come in at around $1.34 billion – below analysts’ forecasts of $1.36 billion – which CEO Ron Keating described as “disappointing.” The group also announced that it would be restructuring its business to merge its current three business divisions into two. Leading up to this announcement, the stock had been trading at a high valuation, so it’s not totally surprising that the stock fell on this news. However, with the stock now down over 40% in the last three months, could it have rebound potential?

 Evoqua Water

Source: 2iQ Research

Looking at recent insider transaction activity here, we do think the shares could be capable of rebounding higher in the medium term. We say this because, since the shares have fallen under $10, a number of high-level insiders have been buying which is a bullish sign. Those purchasing shares have included key names such as CEO Keating, who has spent over half a million dollars on stock to acquire an extra 54,418 shares, CFO Benedict Stas, who bought 8,000 shares, and Chief Level Officer Snehal Desai, who picked up another 10,927 shares. Given that top-level directors are buying shares in Evoqua, we believe the stock has upside potential.

 

Pason Systems Inc (PSI: CN) 

12-month performance: +9%
Insider activity: Bullish
Buying pattern: Purchases from multiple directors including CEO and CFO
Recent news: Q3 revenue beat expectations

 

Pason Systems is a global provider of instrumentation and data management systems for drilling rigs. Pason’s end-to-end portfolio enables customers to collect, manage, report and analyse drilling data, in order to optimise the performance and the cost-efficiency of their operations. The stock is listed on the Toronto Stock Exchange and currently has a market capitalisation of CAD $1.6 billion.

 

Up until a month ago, Pason Systems shares had enjoyed a solid run in 2018, rising from around CAD $17 in January to CAD $23 by early November. Solid results, rising oil prices, and a number of broker upgrades were the key drivers of the share price rise. However, as the oil price has come under pressure in the last month, shares in Pason Systems have pulled back a little, and they now trade for around CAD $19. Could this be a buying opportunity given that Q3 revenue in November came in ahead of expectations?

 Pason Systems

Source: 2iQ Research

Analysing recent insider transaction activity at Pason Systems, we believe that the shares offer upside potential after the recent pullback. We say this because in the last week, we have observed buying activity from four key insiders, including CEO Marcel Kessler, who bought three tranches of shares for around CAD $240,000, and CFO David Elliot, who acquired an extra 1,000 shares at CAD $19.26 per share. This buying activity suggests that management is confident about the future. As such, we think the shares have the potential to move higher.

Disclaimer: Neither 2iQ Research GmbH nor its content providers are responsible for any damages or losses arising from any use of this information.

Getting the most of Insider Trading Data - Free Book

Download
ebook-sample