Insiders Bet on Dialight's Turnaround as Stock Surges

In a sign of confidence in Dialight's (LSE:DIA) future prospects, several insiders have invested in the company's shares, with the stock surging by 12% last week. This positive outlook comes despite the company's recent financial struggles, with losses reported in the last 12 months. So, what's driving this insider buying spree, and should investors follow suit?

Neil Johnson, the Non-Executive Chairman, made the biggest insider purchase in the last 12 months, buying UK£50k worth of shares at a price of UK£1.49 each. Although this purchase was made at a significantly lower price than the recent share price of UK£2.24, it suggests that insiders consider the stock undervalued at lower prices. This transaction indicates that insiders have confidence in the company's future prospects, as they are willing to invest their own money in the company's shares.

Last week, Dialight insiders who had purchased shares in the previous 12 months were rewarded handsomely. The shares increased by 12% last week, resulting in a UK£9.4m increase in the company's market worth. This implies a 50% gain on their initial purchase. This recent insider buying activity suggests that insiders have a positive outlook on the company's future performance, as they are willing to invest in the company's shares at current prices.

However, it's important to note that while insider buying can be a positive sign, it doesn't necessarily indicate that the current share price is a good value. The company's recent financial performance and future growth prospects should also be considered. Dialight's financial performance in the last 12 months was marked by revenue of GBP 134.37 million and a loss of -GBP 29.10 million. The company's loss per share was -GBP 0.75. These figures suggest that the company has been struggling financially, which may explain why the insiders bought shares at lower prices.

In terms of future growth prospects, Dialight's earnings are forecast to grow by 86.3% per year. This is a significant growth rate, but it's important to consider the company's past performance and the risks associated with its business model. The company operates in the industrial lighting sector, which can be volatile and subject to changes in demand.

In conclusion, while insider purchases can be a positive sign, they should be considered alongside the company's recent financial performance and future growth prospects. In Dialight's case, the company's financial struggles and the significant growth rate required to turn the business around may indicate that the insiders' purchases were made at a more attractive price point, but the company's future prospects remain uncertain. Investors should carefully evaluate the company's financial situation and growth prospects before making an investment decision.