The ARB Corporation Limited (ASX: ARB) share price has risen by around 13% over the last month.
That compares to the S&P/ASX 200 Index (ASX: XJO) which has only risen by 2%, meaning ARB has outperformed the index by more than 10%.
However, whilst ARB shares have continued to go up, the company’s leadership has been selling shares.
Leadership share sale
Mr Roger Brown is the chair of ARB, the four-wheel drive accessories business. Andrew Brown is the managing director of ARB. Their shares are held ‘in common’, which essentially means the ARB shares they own are held in entities they both have an interest in.
In May 2019, there was a sale of 2 million shares at a price of $18.50 per share.
On 4 November 2021, there was another sale of 1 million shares at an ARB share price of $49.50. That implies that the sale amounted to around $50 million of ARB shares.
However, whilst the sale was done at a price of $49.50, the current ARB share price is now 6% higher at $52.60.
Is the ARB share price overvalued?
Investors may be wondering if this means that the management believe the stock is priced too highly. Only the leadership know the answer to their own their thoughts about the business valuation.
But, history has shown the ARB share price has risen substantially (up 184%) from the last share sale. Time will tell whether the same applies again here.
It may be useful to know what analysts think about the business value at the moment.
Some recent broker notes have been positive about the business. Both Morgan Stanley and Citi think ARB is still a buy, with price targets of $56 and $55.45 respectively. After seeing the recent trading update, the brokers think that FY22 will show growth after the COVID impacts.
On Citi’s numbers, the ARB share price is valued at 37x FY22’s estimated earnings.
In the company’s annual general meeting (AGM) update, it said that in the first quarter of FY22 it saw “pleasing sales and profit growth”.
However, there are a number of challenges in the current environment including vehicle supply interruptions, COVID-19 related impacts and the cost and reliability of freight services.
It said that its order book remains strong, both domestically and internationally, and it’s continuing its product development work, store development program in Australia and the expansion of its manufacturing capability.
ARB is expecting sales and profit growth to continue in the first half. It also believes it’s well positioned to achieve long-term success with its brands around the world, increasing manufacturing and distribution capacity and a strong balance sheet to take advantage of opportunities as they arise.
The company also announced a few months ago that a range of ARB accessories would become available at participating Ford dealers for Ranger and Everest vehicles. This will be rolled out in Australia initially, with other selected Ford markets to follow.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended ARB Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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