A Strong Signal For RF Industries Investors
We already knew that RF Industries, Ltd (NASDAQ: RFIL) was well-positioned for today’s market. The company makes a wide range of RF connector and cable assembly components that are in high demand by telecoms, 5G, industrials, instrumentation, and military customers. After perusing the insider and institutional trading data, we now know the insiders and the sell-side community sees something in this company too. If the insider or institutional trading data can be viewed as a signal individually, then it is a very strong signal indeed when the data converge and the data, it is converging.
Insiders And Institutions Accumulate RF Industries, Ltd.
Insider activity hasn’t been robust in terms of the number of trades but there are several details of interest to us. The takeaways are that the 13 transactions amount to roughly 105,000 shares traded with the bulk of activity buying. Net buying over the past 12 months is 63,539 shares or about 0.6% of the company. This brings the total insider ownership up to 10.2% which we view as a very significant figure. This company’s management team not only has skin in the game but is adding to its holdings.
As for the institutions, institutional ownership is still a bit low at only 30% but this figure is growing as well. Institutions have been net buyers of the stock all year as well with the bulk of the buying in calendar Q3 and Q4 2021. Net buying amounts to over $11.03 million or about 14% of the market cap which is another very significant figure. The institutions effectively doubled their holdings in their stock over the past year and we see them adding to their positions again in calendar 2022. Ironically, RF Industries has only one analyst rating the stock but it’s a very fresh rating of Buy that came out since the last earnings report.
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Mixed Results Drive RF Industries Higher
RF Industries gave a mixed report but only in relation to the analyst’s expectations for revenue and earnings growth. The company reported $21.1 million in revenue for a gain of 97.4% over last year, outpacing the consensus by 2700 basis points, but the earnings fell short. The earnings of $0.08 GAAP and $0.10 adjusted missed by $0.03 and $0.02 but are up more than double from last year. More importantly, in our view at least, the company reported an increasing backlog driven by strong order bookings and gave a very favorable outlook as well.
The company is guiding revenue growth for FY2022 to be greater than 10% on a core, ongoing business basis. This does not include the recent acquisition of Microlab which should be immediately accretive or any follow-on orders from its existing customers. In our view, the guidance is both encouraging and cautious given the strength of underlying trends in tech, communications, and infrastructure spending.
The Technical Outlook: RF Industries Is Heading Back To $10
Shares of RF Industries pulled back from a high set earlier this year and have since put in a bottom. Price action is now moving higher from the $6.50 level and appears to be gaining momentum. With price action above the 150-day moving average and above the $8 level we view the $10 level as the next best target for resistance. A move above $10 would be very bullish and bring previous highs near $12 and $14 into play as targets.
Companies in This Article:
|Company||Current Price||Price Change||Dividend Yield||P/E Ratio||Consensus Rating||Consensus Price Target|
|RF Industries (RFIL)||$2.80||+1.4%||N/A||-16.47||Buy||$4.25|