3 Stocks With Recent Intensive Insider Selling

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Includes: APEI, COO, SPLK
by: Markus Aarnio

When insiders sell a stock intensively, the stock is expected to underperform the market during the next six months following "intensive" insider selling.

Intensive insider selling can be defined by the following three criteria:

  1. The stock was sold by three or more insiders within one month.
  2. The stock was purchased by no insiders in the month of intensive selling.
  3. At least two sellers decreased their holdings by more than 10 percent.

In this article I will feature three stocks that met these three criteria of intensive insider selling during the last 30 days.

1. The Cooper Companies (NYSE:COO) is a global medical device company publicly traded on the NYSE Euronext.

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Insider sells

  • John Weber sold 14,625 shares on December 28 and currently holds 11,995 shares or less than 0.1% of the company. Mr. Weber has served as President of CooperVision since February 2008.
  • Robert Weiss sold 54,000 shares on December 20-27 and currently holds 119,428 shares or 0.2% of the company. Mr. Weiss has served as President since March 2008 and Chief Executive Officer since November 2007.
  • Michael Kalkstein sold 11,500 shares on December 26 and currently holds 13,500 shares or less than 0.1% of the company. Michael Kalkstein serves as a director of the company.
  • Stanley Zinberg sold 1,600 shares on December 17 and currently holds 12,364 shares or less than 0.1% of the company. Stanley Zinberg serves as a director of the company.

Financials

The company reported the full fiscal year 2012, which ended October 31, financial results on December 6 with the following highlights:

Revenue $1.4 billion
Net income $248.3 million
Cash $12.8 million
Debt $373.7 million
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Outlook

The company's full year 2013 guidance is as follows:

Revenue (millions) $1,565 - $1,625
EPS $5.70-$6.00
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Competition

The Cooper Companies' competitors include Johnson & Johnson (NYSE:JNJ). Here is a table comparing these two companies.

Company COO JNJ Industry
Market Cap: 4.44B 192.55B 182.53M
Employees: 7,800 117,900 375.00
Qtrly Rev Growth (yoy): 0.10 0.07 0.12
Revenue: 1.45B 65.92B 89.37M
Gross Margin: 0.64 0.68 0.53
EBITDA: 399.51M 20.45B 4.97M
Operating Margin: 0.20 0.26 0.04
Net Income: 248.34M 8.50B N/A
EPS: 5.05 3.05 N/A
P/E: 18.12 22.76 19.87
PEG (5 yr expected): 0.99 2.25 1.20
P/S: 3.10 2.95 2.45
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The Cooper Companies is trading above the industry average P/S ratio.

My analysis

The stock has a $88 price target from the Point and Figure chart. There have been 42 insider sell transactions and there have not been any insider buy transactions this year. There are five analyst buy ratings, one neutral rating and 0 sell ratings with a average target price of $92.80. The stock is trading at a P/E ratio of 18.12 and a forward P/E ratio of 13.95. The company has a book value of $45.26 per share. There is an opportunity for a short entry with the $88 target price and a stop loss at $98 which is the one month high.

2. Splunk (NASDAQ:SPLK) provides software solutions that provide real-time operational intelligence.

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Insider sells

  • Godfrey Sullivan sold 500,000 shares on December 5-26 pursuant to a Rule 10b5-1 trading plan adopted on September 20, 2012. Godfrey Sullivan currently controls 5,725,655 shares or 5.8% of the company. Godfrey Sullivan has served as the company's President, Chief Executive Officer and a member of board of directors since September 2008, and as Chairman since December 2011.
  • Thomas Schodorf sold 6,000 shares on December 11-26 pursuant to a Rule 10b5-1 trading plan adopted on September 18, 2012. Thomas Schodorf currently controls 885,468 shares or 0.9% of the company. Thomas Schodorf has served as the company's Senior Vice President, Field Operations since October 2009.
  • Leonard Stein sold 66,700 shares on December 18-21 pursuant to a Rule 10b5-1 trading plan adopted on September 29, 2012. Leonard Stein currently holds 84,770 shares or less than 0.1% of the company. Leonard Stein has served as the company's Senior Vice President, General Counsel since April 2011.
  • David Conte sold 25,000 shares on December 10 pursuant to a Rule 10b5-1 trading plan adopted on September 26, 2012. David Conte currently controls 905,000 shares or 0.9% of the company. David Conte has served as the company's Senior Vice President and Chief Financial Officer since July 2011.
  • Nicholas Sturiale sold 21,961 shares on December 4 and currently controls 8,252,175 shares or 8.4% of the company. Nicholas Sturiale has served as a member of the company's board of directors since August 2004.
  • David Hornik sold 7,669 shares on December 4 and currently controls 14,266 shares or less than 0.1% of the company. David Hornik has served as a member of the company's board of directors since August 2004.

Financials

The company reported the third-quarter financial results on November 29 with the following highlights:

Revenue $52.0 million
Net loss $5.5 million
Cash $273.3 million
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Outlook

The company provided the following guidance for its fiscal 2013 fourth quarter (ending January 31, 2013):

  • Total revenue is expected to be between $58 million and $60 million.
  • Non-GAAP operating margin is expected to be between 3% and 4%.

The company updated its previous guidance for its 2013 full fiscal year (ending January 31, 2013):

  • Total revenue is now expected to be between $192 million and $194 million (was previously $183 million to $186 million as of August 30, 2012).
  • Non-GAAP operating margin is expected to be between negative 1% and negative 2% (was previously negative 2% to negative 3% as of August 30, 2012).

Competition

Splunk's competitors include BMC Software (NASDAQ:BMC). Here is a table comparing these two companies.

Company SPLK BMC Industry
Market Cap: 2.80B 6.13B 220.00M
Employees: 463 6,900 387.00
Qtrly Rev Growth (yoy): 0.67 -0.02 0.22
Revenue: 176.92M 2.17B 95.73M
Gross Margin: 0.90 0.73 0.71
EBITDA: -12.67M 615.20M 4.28M
Operating Margin: -0.09 0.22 0.02
Net Income: -31.80M 342.60M N/A
EPS: -0.52 2.08 N/A
P/E: N/A 19.00 24.53
PEG (5 yr expected): N/A 0.93 1.10
P/S: 16.04 2.85 3.06
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Splunk is trading above the industry average P/S ratio.

My analysis

The stock has a $15 price target from the Point and Figure chart. There have been 32 insider sell transactions and there have not been any insider buy transactions since April 2012. There are 11 analyst buy ratings, five neutral ratings and one sell rating with a average target price of $36.62. The company has a book value of $2.31 per share. There is an opportunity for a short entry with the $15 target price and a stop loss at $38 which is the three month high.

3. American Public Education (NASDAQ:APEI) is an online provider of higher education focused primarily on serving the military and public service communities.

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Insider sells

  • Harry Wilkins sold 15,000 shares on December 17 pursuant to Rule 10b5-1 sales plan. Harry Wilkins currently controls 72,186 shares or 0.4% of the company. Mr. Harry Wilkins, CPA, joined the company as the Chief Financial Officer and Executive Vice President in January 2007.
  • Wallace Boston sold 95,760 shares on December 6-12 and currently holds 257,982 shares or 1.4% of the company. Dr. Wallace Boston was appointed President and Chief Executive Officer of American Public University System and its parent company, American Public Education in July 2004.
  • Jean Halle sold 1,500 shares on December 7 and 1,500 shares on November 28. Jean Halle currently holds 43,525 shares or 0.2% of the company. Jean Halle serves as a director of the company.
  • Eric Andersen sold 2,200 shares on December 6 and currently holds 2,891 shares or less than 0.1% of the company. Eric Andersen serves as a director of the company.
  • Christopher Everett sold 10,000 shares on November 30 and currently holds 27,793 shares or 0.2% of the company. Christopher Everett serves as a director of the company.

Financials

The company reported the third-quarter financial results on November 8 with the following highlights:

Revenue $77.1 million
Net income $10.8 million
Cash $101.6 million
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Outlook

American Public Education anticipates fourth quarter 2012 net course registrations by new students to be between -7% and -3% year-over-year; net course registrations to increase between approximately 8% and 12% year-over-year; revenues to increase between approximately 9% and 13% over the prior year period; and net income to be between $0.64 and $0.67 per diluted share. In addition, the company anticipates full-year 2012 net income to be between $2.25 and $2.28 per diluted share.

Competition

American Public Education's competitors include Apollo Group (NASDAQ:APOL), DeVry (NYSE:DV) and ITT Educational Services (NYSE:ESI). Here is a table comparing these companies.

Company APEI APOL DV ESI Industry
Market Cap: 642.78M 2.28B 1.69B 443.39M 248.51M
Employees: 2,615 49,146 10,863 5,800 830.00
Qtrly Rev Growth (yoy): 0.18 -0.09 -0.07 -0.13 0.16
Revenue: 303.18M 4.25B 2.05B 1.35B 189.65M
Gross Margin: 0.65 0.58 0.52 0.64 0.37
EBITDA: 77.85M 904.68M 363.29M 404.89M 22.98M
Operating Margin: 0.22 0.17 0.13 0.28 0.07
Net Income: 42.13M 388.86M 116.07M 225.98M N/A
EPS: 2.32 3.48 1.74 9.12 0.12
P/E: 15.68 5.83 15.32 2.08 22.25
PEG (5 yr expected): 1.01 0.74 1.31 -0.24 1.12
P/S: 2.08 0.53 0.82 0.33 1.75
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American Public Education is trading above the industry average P/S ratio.

My analysis

The stock has a bearish $21 price target from the Point and Figure chart. There have been six insider sell transactions and there have not been any insider buy transactions during the last 30 days. There are nine analyst buy ratings, four neutral ratings and one sell rating with a average target price of $40.00. The stock is trading at a P/E ratio of 15.68 and a forward P/E ratio of 13.84. The company has a book value of $8.61 per share. There is an opportunity for a short entry with the $21 price target from the Point and Figure chart. I would place a stop loss at the 3 month highs around $40.

Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in APEI over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.