KTCC

Key Tronic ($KTCC) Insiders Load Up Amid 54% Stock Plunge - Director and CEO Acquire 88,000 Shares

05/19/2025 20:43

Key Tronic Corporation ($KTCC), an electronics manufacturing services (EMS) provider, has recently witnessed significant insider buying from its executives and directors as the stock trades near its 52-week low, indicating notable confidence from company insiders. Director Craig Gates made consecutive purchases over two days, acquiring a total of 85,000 shares for approximately $211,650. The average purchase prices were $2.41 per share on May 14, 2025, and $2.58 per share on May 15, 2025. Following these purchases, CEO Mark Courtney also bought 3,000 shares at $2.73 per share for a total of $8,190 on May 16, 2025. These transactions represent the first major insider purchases since September 2024, when Director Cheryl Beranek acquired 2,000 shares at $4.58. This insider buying activity comes as Key Tronic's stock has plummeted approximately 54% over the past six months. Trading at around $6 per share in early November 2024, $KTCC declined to as low as $2.30 before slightly rebounding. The stock closed at $2.75 on May 16, 2025, representing a significant undervaluation relative to its book value, with a price-to-book ratio of just 0.25. In contrast to this insider confidence, Key Tronic's financial performance has been challenging. Revenue for the third quarter of fiscal 2025 was $112 million, a decrease of approximately 21% compared to $142.4 million in the same period last year. The company reported a net loss of $4.4 million for the first nine months of fiscal 2025, worse than the $0.8 million loss reported for the same period in the previous year. These disappointing results can be attributed to several factors, including reduced customer demand due to global economic uncertainties and tariff issues, as well as an unauthorized access incident to the company's IT systems in June 2024. At that time, Key Tronic announced that the two-week production loss would have a material impact on its fourth-quarter results. However, not all indicators are negative. The company has improved its gross margin from 5.7% to 7.7% year-over-year through cost management strategies and increased its operating cash flow from $6.1 million to $10.1 million. Additionally, Key Tronic has successfully reduced inventory levels by approximately $16 million (14%) compared to the previous year. Furthermore, Key Tronic is expanding its manufacturing operations in Arkansas and Vietnam to mitigate tariff impacts and enhance production capacity and flexibility. The Arkansas facility is expected to create over 400 jobs and is part of a broader strategy to optimize the company's long-term growth potential. This insider buying activity takes on special significance as the U.S. market has risen for five consecutive days, buoyed by optimism surrounding a temporary truce in the U.S.-China trade conflict. Traditionally, insider purchases are considered a strong signal reflecting management's confidence in a company's future. Nevertheless, Key Tronic's financial situation remains concerning in some aspects. The company has a high debt-to-equity ratio of 90.09%, and its cash holdings of just $3.47 million raise concerns about liquidity. Moreover, sustained profitability recovery remains uncertain. Despite these challenges, the recent insider purchases may signal internal confidence that the company can overcome its current difficulties and recover in the long term. The substantial purchases by the director and CEO likely reflect their assessment that the current stock price significantly undervalues the company's actual worth. Investors should closely monitor these insider trading signals alongside improvements in the company's financial situation.

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