Insider Buying Says Travelport (TVPT), Yext (YEXT), and Kratos (KTOS) Are Undervalued

The global markets are opening to fear and trepidation this morning after they were rocked at the end of last week by the prospect of a trade war between the world’s two biggest economies, the U.S and China.

When the markets are churning and stocks are falling, company insiders often use the turmoil to buy some shares at what they believe is a discount. Such buying took place among the insider ranks of Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS), Travelport Worldwide Ltd (NYSE:TVPT), and Yext Inc (NYSE:YEXT) last week. We’ll look at those transactions and the state of these stocks in this article.

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Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS)

Who Bought Shares: President, TTS Division Phillip Carrai

How Many Shares Were Bought: 4,000 @ $9.45 per share

Date of the Transaction(s): March 19

Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS) Insiders Have Been Active: In addition to the above insider purchase which took place last Monday, three other Kratos insiders have purchased shares in March. Directors Scot Jarvis (10,000 shares purchased in three separate transactions), Amy Zegart (3,205 shares) and Jane Judd (1,100 shares) have all purchased Kratos shares within the past month.

Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS) Shares Shot Down by Short Report: The intensified insider buying during March comes on the heels of a rapidly declining stock, which has lost nearly 30% of its value since mid-February. Spruce Point piled onto the stock on March 16, issuing a report that claimed Kratos management has destroyed “tremendous value” and suggesting the stock has 40% to 70% downside risk.

Kratos deemed the report to be “factually incorrect” last Monday, while Canaccord Genuity analyst Ken Herbert described the further pullback resulting from it as a buying opportunity, stating that the short report contained numerous old data points and didn’t address the Department of Defense’s growing investment in unmanned vehicles. A day later, it was revealed that President Trump is planning to make it easier for the U.S to export lethal drones to its allies, which should further benefit Kratos and other American drone makers.

On the next page we’ll look at two other stocks that insider buying indicates as being undervalued.

Travelport Worldwide Ltd (NYSE:TVPT)

Who Bought Shares: President & CEO Gordon Wilson and EVP & CFO Bernard Bot

How Many Shares Were Bought: 6,900 @ $14.42 each and 6,900 @ $14.40 each

Date of the Transaction(s): March 19 and 20

The (nearly) identical purchases by Travelport Worldwide Ltd (NYSE:TVPT)’s leading executives are the first registered by any of the company’s insiders in two-and-a-half years. The timing is also rather unusual for concerted insider buying, given that the stock has gained 16% since February 9, when it hit six-month lows.

Nonetheless, the executives are clearly expressing confidence in Travelport’s performance and what that should mean for shares in the future. Addressing the company’s fourth-quarter financial results in late-February, CEO Wilson stated that Travelport Worldwide Ltd (NYSE:TVPT)’s revenue growth is on a “great trajectory”, forecasting a 7% to 10% revenue rise in 2018 after a 4% rise in 2017. Wilson praised the company’s performance in the Asia and Latin America markets, where it won new business, which contributed towards a record 2017 on that front.

Yext Inc (NYSE:YEXT)

Who Bought Shares: Tippet Venture Partners II

How Many Shares Were Bought: 1 million @ $12 per share

Date of the Transaction(s): March 21

Tippet Venture Partners II’s Insider Connection to Yext Inc (NYSE:YEXT): Yext Director Andrew Sheehan is the managing director of TPV II’s general partner, which now owns 1 million shares (the amount purchased on March 21). Sheehan fills the same role for Tippet Venture Partners, which already owned 447,048 shares of Yext. Sheehan has further indirect ownership of just under 385,000 shares and direct ownership of 10,845 shares.

Yext Inc (NYSE:YEXT) Quarterly Results Open Path to Million-Share Purchase: Yext shares cruised to a three-month high above $13.50 just before the company’s fiscal 2018 fourth-quarter results were released after the market close on March 8. The following day, they lost over 7% of their value and continued to slide further over the ensuing days.

As the quarterly results and fiscal 2019 guidance were all squarely within the range of estimates, it’s unclear what aspect of Yext’s earnings the market took issue with. Gross margin in the company’s fiscal fourth quarter ended January 31, 2018, rose by 1.9 percentage points to 74.6%, while revenue jumped by 35% to $48 million. Yext’s non-GAAP net loss did widen to $44.2 million during its fiscal 2018 from a $33.3 million loss a year earlier, due in part to greater marketing and customer outreach efforts.

Disclosure: None