The Reliance Worldwide Corporation Ltd (ASX: RWC) share price has gone down the drain this year.
Like many other ASX 200 shares, Reliance Worldwide has been battling sharp cost inflation, supply chain bottlenecks, and logistics disruptions.
But it’s also been suffering from a turn in investor sentiment. As a plumbing parts company, the demand for its products is linked to repair, maintenance, and remodelling activity.
As a result, Reliance is exposed to consumer confidence, which is being threatened by rising interest rates and soaring inflation.
So, the Reliance Worldwide share price is reeling this year. With shares last changing hands at $2.99, the Reliance Worldwide share price has tumbled 52% in the year to date.
This downward slide has only been continuing recently, with Reliance Worldwide shares retreating 15% in the past month to languish at 52-week lows.
The market didn’t react kindly to the company’s recent quarterly trading update, which showed earnings margins heading south.
Reliance Worldwide directors go on a buying spree
The Reliance Worldwide share price isn’t getting any love from investors. But the company’s directors have seen this as an opportunity to pick up shares.
It appears as though these directors have banded together, with six of Reliance’s eight directors purchasing shares on-market in recent weeks. The company’s CEO, Heath Sharp, hasn’t joined in.
As the great investor Peter Lynch once said, “insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise”.
Non-executive chair Stuart Crosby kicked off the buying at the end of October, picking up 31,250 Reliance Worldwide shares for around $100,000.
Non-executive director Christine Bartlett came to the table on 31 October. She bought up 20,000 Reliance Worldwide shares, splashing $64,000 in the process.
In the past week, four more non-executive directors have joined the buying party. They’ve each purchased parcels of between 15,000 and 27,000 shares, forking out between $45,000 and $83,000.
Overall, these purchases are on the smaller end of the scale. And the directors’ total holdings aren’t sizeable either, with four of these directors owning 50,000 Reliance Worldwide shares or fewer after the transactions.
Nonetheless, these efforts can be seen as a vote of confidence and a positive signal for investors.
What’s next for Reliance Worldwide shares?
Reliance held its 2022 annual general meeting (AGM) at the end of last month.
Commenting on the outlook, CEO Heath Sharp noted that there continues to be a backlog of work in most of its markets. This is because demand has run ahead of the ability of contractors to satisfy it.
The company believes this backlog will underpin volumes in FY23.
What’s more, Reliance believes its position in the market should help it weather some of the economic storm:
We continue to believe that our market orientation helps cushion us from any marked economic downturn should it eventuate. We are principally focussed on repair, maintenance and remodel activity, with lower exposure to cyclical construction markets.
At the same time, the company acknowledged the risks of continued inflationary pressure, rising interest rates, geopolitical tensions, higher energy costs, and supply chain disruptions.
As it stands, Reliance commands a market capitalisation of nearly $2.4 billion.
The company generated net profit after tax (NPAT) of US$137 million in FY22, down 3% from the prior year.
This means that Reliance Worldwide shares are currently trading on a trailing price-to-earnings (P/E) ratio of around 11x.
