Insider buying occurs when company executives, board members, or major shareholders purchase shares, which is often viewed as a signal of confidence in the company’s future. That's because when executives make significant stock purchases with their own money, it’s generally considered a positive sign that they expect the share price to rise. Investors closely watch these transactions, as they may suggest that insiders believe the stock is undervalued or poised for growth.
Recently, the chairman of a small-cap company within the Russell 2000 Index (RUT) invested over $2 million in his stock in a single transaction, which shed some light on a couple of smaller purchases made by other well-placed company insiders around the same time frame. This substantial insider buying suggests strong confidence in the company's prospects. Here's a closer look at this under-the-radar Russell 2000 stock.
About Cantaloupe Stock
Founded in 1992 as USA Technologies, Cantaloupe (CTLP) specializes in providing digital payment solutions, vending management systems, and software services for unattended retail businesses, including vending machines, kiosks, and self-service checkout systems.
Up only about 5% on a YTD basis, Cantaloupe stock has been a relative underperformer. However, the stock has rallied sharply from its April lows, and is up about 23% over the past six months.
Insiders seem to think that CTLP stock is a good buy around current prices. On Sept. 30, Chairman Douglas Bergeron invested $2.1 million to purchase 284,000 shares of the company at an average price of $7.3973 per share. Following this sizeable transaction, Bergeron has now upped his stake in the company to 0.6334%.
While Bergeron's purchase was the most notable, two other Cantaloupe insiders made purchases of company stock during September, as well - including CEO Ravi Venkatesan. While the top executive scooped up 8,000 shares worth $50,4000 in the middle of last month, Director Lisa Baird invested $44,521 to purchase 6,000 shares just a few days before Bergeron.
Notably, Venkatesan and Baird both purchased CTLP stock in February, too.
Encouraging Fiscal Q4 Results
Cantaloupe closed its most recent fiscal year with a strong set of numbers, even though earnings slipped from the previous year. In its fiscal Q4, Cantaloupe reported total revenues of $72.6 million, up 13.2% year over year as both subscriptions ($61.1 million, +15.4% YoY) and equipment sales ($11.5 million, +2.9% YoY) improved. Net income totaled $2.2 million, or $0.03 per share, down 25% from the prior year.
While the headline results fell short of estimates, a couple of key operating metrics improved. Active customers at the end of the quarter stood at 31,466, compared to 28,584 at the end of Q4 2023. Similarly, active devices were at 1.22 million, up from 1.17 million in the year-ago period.
For the full fiscal year 2024, Cantaloupe's net cash from operating activities increased to $27.7 million. This marked an impressive yearly growth of 95.5%, almost doubling from $14.2 million in fiscal 2023. Overall, the company closed the quarter with a cash balance of $58.9 million, compared to its short-term debt levels of $1.3 million.
Guidance for fiscal year 2025 calls for total revenue to range between $308 million and $322 million, with the lower rail indicating expected growth of 14.7% from fiscal year 2024.
What's Driving Growth for Cantaloupe?
The self-service vending market where Cantaloupe operates was valued at $32 billion post-pandemic, and is projected to exceed $88 billion by 2030. With large ecommerce players like Amazon (AMZN) supporting the shift, the trend is expected to continue to gain traction amid increasing mobile and digital adoption among consumers.
Given its well-established niche in a burgeoning market, Cantaloupe management remains confident that its products can compete and gain market share in this lucrative industry. To that end, the company announced an acquisition in Europe to enhance its operations in Europe.
Management Vision On Track
In December 2022, Cantaloupe's management unveiled a three-year growth plan targeting a 15% compound annual growth rate (CAGR) in revenue, driven by market penetration, international expansion, and an increase in average revenue per user (ARPU). The company expects to achieve a remarkable 70% CAGR in EBITDA, thanks to significant operating leverage within its business model. This strategy aims to turn around a history marked by profitability challenges, positioning Cantaloupe for substantial growth.
As of now, Cantaloupe is on track to achieve its fiscal 2026 EBITDA goal of approximately $75 million, albeit with a different revenue composition than initially anticipated. While transaction growth has exceeded expectations, subscription fees have underperformed, primarily due to a backlog of sold hardware awaiting installation, which is hindered by a labor shortage. Management remains confident that as these devices are installed and activated, subscription revenue will gain momentum, ultimately contributing to the company's growth objectives.
What's the Wall Street Verdict on CTLP Stock?
Analysts, like insiders, appear to be overwhelmingly bullish on Cantaloupe stock.
All 6 analysts in coverage have unanimously deemed the stock a “Strong Buy,” with a mean target price of $10.30. This indicates an upside potential of about 32.4% from current levels.
