Less than a month back leading Calavo Growers (US:CVGW), CEO Lee Cole is walking the talk, increasing his holdings of the company’s stock.
The 50,000 share purchase, at $27.96 a piece, was first spotted on Fintel’s CEO purchases page on Wednesday evening. The stock price popped more than 4% in afterhours trading. He now holds 440,000 shares, according to the SEC Form 4 filing.
Calavo Growers is a leading provider of premium fresh avocados and other fresh produce that was initially founded in 1924 as an agricultural cooperative and played a key role in establishing the California avocado industry.
Cole, who previously led the company from 1999 until his retirement at the beginning of 2020, was appointed as the interim CEO on March 13, succeeding Brian Kocher, who stepped down from the position. Cole agreed to return to the company on a three-year basis with the goal of returning the company to growth with shareholder value creation.
Since his retirement, coming just as the pandemic was emerging, CVGW stock price is down more than 64%.
Fresh Challenges
As a “boomerang CEO,” Cole has his work cut out for him.
Beyond the stock decline, his return to Calavo comes at a critical time for the company. The fresh produce industry has been facing significant challenges in recent years, including supply chain disruptions, labor shortages, and changing consumer preferences.
Industry analysts believe that Cole’s return to Calavo could signal a new chapter for the company. With his extensive experience and track record of success, Cole is expected to bring fresh ideas and strategies to address the challenges facing the industry.
Yesterday’s trade was the second one made by the CEO since his return less than two weeks ago.
Cole also bought 50,000 shares across two transactions last week at prices ranging from $23.91 to $25.04 for a total trade value slightly above $1.2 million.
In total, Cole has acquired more than $2.6 million worth of stock and owns 440,000 shares collectively equating to about 2.5% ownership of the float.
Cole’s latest share purchases signal confidence in the outlook for the company over the medium term.
Insider Sentiment
The transactions have boosted Fintel’s Insider Sentiment Score for CVGW to 85.39. This bullish score ranks Calavo in the top 2%, at at 281st, out of 14,909 globally screened companies for the highest levels of insider buying activity.
Insiders have purchased 0.3% of the float in the past 90 days which is a bullish sign.
When we looked deeper into the stock, we see that weak institutional buying activity has likely been a weighing factor on the stock.
Fintel’s Fund Sentiment Score of 35.88 is bearish on the company’s institutional interest, ranking CVGW in the bottom 30% out of 36,587 globally screened securities.
There are 396 institutions on the register that collectively own 17.05 million shares if the float, representing a significant portion of the register.
The chart to the right shows the declining level of institutional share ownership with the share price falls over the last five years since Cole’s retirement in early 2020.
Analyst Opinions
First quarter results were weak across the board with total revenue declining 18% to $226.2 million. The Grown segment revenue decreased 27% year-over-year to $117.7 million, while Prepared segment revenue decreased 3% year-over-year to $108.5 million.
Previous CEO Brian Kocher attributed the poor result to challenging market conditions to low avocado prices and margins, as well as volume softness and winter weather.
Lake Street Capital markets analyst Ben Klieve maintained his buy rating on the stock but slashed his target price to $38 from $50. Klieve said that even though the second half of 2022 and the first quarter of 2023 were underperforming periods, he believes the company is in a much stronger position than it was before the pandemic.
Even though macroeconomic challenges like volatile supply and pricing of avocados remains a challenge, Lake Street believes long-term demand is secure.
Fintel’s consensus target price of $36.72 suggests the stock could rise as much as 30% over the next year under Cole’s leadership. While analysts are curious on the stock, they believe intrinsic value is above current share price levels.
This article originally appeared on Fintel
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