Griffon Corporation (NYSE:GFF)’s Chief Executive Officer, J Ronald Kramer, has been loading on stock lately. He made two purchases, on December 6 and 9, adding to his portfolio 10,000 shares each time. He paid an average price of $13.05 per share in the first transaction, and $12.72 per share in the second one. He now owns almost 2.2 million shares, valued at roughly $28 million.
The purchase doesn’t seem to follow any particular event, but rather looks like a bet on growth (see details on growth forecasts an valuation below).
F Robert Mehmel, President and COO, has also been acquiring Griffon Corporation (NYSE:GFF)’s stock over the past year. He started a position in May, and now owns 50,000 shares. He paid less than $12 in each of his transactions, which means he has already perceived an upside from all of his investments (stock currently trades around $12.87).
This small-cap company operates in three business segments, Home & Building Products, Telephonics Corporation and Clopay Plastic Products. With a market cap of barely $755 million, it has still attracted the attention of a few hedge funds, including Mario Gabelli’s Gamco Investors, which holds roughly 6.5 million shares valued at about $81 million. Other prominent hedge fund bulls betting on Griffon Corporation (NYSE:GFF)’s long-term results are Richard S. Pzena, Chuck Royce and D. E. Shaw. They own 1.94 million, 912,000 and 303,000 shares each, respectively.
Although valuation at 106 times its earnings seems a little high, Griffon Corporation (NYSE:GFF) trades at a significant discount in relation to its peers. The Building Materials’ industry average P/E ratio stands at 2500 x, more than 23 times this stock’s valuation. The company also offers decent returns on equity: 0.6%, versus the industry mean of 0.1%.
Growth forecasts for Griffon Corporation (NYSE:GFF) are also quite encouraging: analysts expects average annual EPS growth rates between 11% and 34% for the next five years to come. Needless to say, hence, that its forward P/E looks very attractive at 13.2 times its earnings (Morningstar). It looks to me like a good time to buy and hold this stock. If insiders are betting on growth, why should you?
Disclosure: Javier Hasse holds no position in any stocks mentioned