Inside Evolution AB's Insider Buying: A Prelude to Undervaluation Correction?

Evolution AB (publ) (EVO.ST), a leading B2B gambling technology provider, has quietly become a focal point for investors seeking undervalued opportunities. Amid a 5.8% stock decline over the past 90 days and a recent earnings miss, a surge in insider buying—led by CEO Martin Carlesund—hints at a potential undervaluation correction ahead of its July 17 earnings report. Let's dissect the signals.

Insider Buying: A Contrarian Signal

Between late 2024 and early 2025, Evolution AB insiders executed four substantial purchases totaling SEK 72.8 million. The most notable activity came from CEO Carlesund, who bought 100,000 shares (SEK 33.6 million) in mid-June 2025 at prices between SEK 667.90 and 673.34. This followed purchases by executives like Jacob Claesson (Head of North America) and Louise Wiwen-Nilsson, signaling senior leadership's confidence in the company's long-term prospects.

The stock's recent decline contrasts sharply with the buying activity of key executives.

Valuation: A Discounted Gem?

Despite the stock's slump, Evolution AB's valuation metrics suggest significant undervaluation:
- Trailing P/E: 12.15 (below its 3-year average of 19.85).
- Forward P/E: 12.69, implying growth potential.
- Price-to-Book (P/B): 3.57, far below its 10-year high of 36.64 and near sector peers.
- EV/EBITDA: 9.13, a premium to its peers but justified by high margins (ROE of 30.29%, ROIC of 21.28%).

Valuation multiples are at multi-year lows, despite strong cash flow and profitability.

The Catalyst: July 17 Earnings Report

The upcoming earnings release on July 17, 2025, is critical. The last report missed EPS estimates by 9.94%, but insiders' buying suggests management believes this quarter will reassure investors. Key watchpoints:
- Revenue growth in North America and Asia.
- Margin retention amid macroeconomic headwinds.
- Guidance on 2025 free cash flow (historically 1.40 billion SEK).

Investment Thesis: A Contrarian Play

Buy the dip, but with discipline.
- Entry Point: Current price (SEK 68.60) is near 52-week lows. Insider purchases at ~SEK 670+ suggest a floor.
- Catalyst Risk: Another earnings miss could extend the downturn.
- Upside Case: A strong report could push the stock toward its 52-week high of SEK 93, offering a ~36% gain.

Action Items:
1. Go long ahead of earnings, targeting a 12–18-month horizon.
2. Set a stop-loss at SEK 65 (below recent support levels).
3. Monitor insider activity post-earnings for further signals.

Risks to Consider

• Sector-specific headwinds: Gambling regulation changes or macroeconomic slowdowns.
• Execution risk: Competitors like Kambi Group or Playtech may outpace Evolution's growth.

Conclusion

Evolution AB's insider buying, discounted valuation, and upcoming catalyst create a compelling contrarian opportunity. While risks exist, the alignment of internal confidence and undervalued metrics suggests this could be a high-reward, medium-risk bet for patient investors.

Final thought: When executives buy at the bottom, markets often follow—eventually.

Strong dividends (3.28%) and buybacks (3.60% yield) add to its appeal for income-focused investors.