There has been some insider buying at Xero Limited (ASX: XRO). Should you also buy at today’s Xero share price?
Insider buying at Xero
It can be a very insightful thing when members of a leadership team decide to buy shares on the share market.
There can be a whole host of different reasons why directors or management sell shares, but there’s normally only one reason why they buy – they think it’s good value at the current price.
Two different directors decided to buy Xero shares on the market recently.
One was David Thodey AO, the current Chair of Xero. He decided to buy 1,539 Xero shares at an average price of $118.75 – that amounted to spending $182,764. His total investment is now 10,000 Xero shares (worth around $1.2 million).
The other buy was by independent director Mark Cross. Mr Cross bought 1,800 shares at a price of around $117 per share – a total purchase worth $210,597. That brings his total ownership to 4,300 shares.
These aren’t huge purchases compared to Xero’s market capitalisation, but I think it’s a very good sign that independent directors want to put in a large amount of their own money to buy shares at this Xero share price.
Is it a good time to buy at this Xero share price?
Xero is up 4% this morning. But it’s still down by around 15% over the last month.
I couldn’t describe Xero as cheap. Its market capitalisation of more than $17 billion looks pricey compared to the NZ$973.6 million annualised monthly recurring revenue (AMRR) that it reported in its FY21 result.
But Xero’s service is very profitable compared to many other businesses with a gross profit margin of 86%. You can see this profitability come through when operating revenue increased 18% to NZ$849 million and free cashflow rising 110% to NZ$57 million.
That strong operating leverage should mean it’s very profitable in the years to come, so it’s worth the current valuation (and maybe more).
I believe that Xero is one of the best ASX growth shares around and it’s worth owning for the next decade as it continues to win over many more global subscribers.
