2 Software Companies And A Semiconductor With Recent Intensive Insider Selling

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 |  Includes: MDSO, RP, XLNX
by: Markus Aarnio

The technology sector has been the worst-performing group over the recent six-month period with a gain of just 0.8%.

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For this article, I screened for technology stocks that have seen recent 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 not purchased by any insiders in the month of intensive selling.
  3. At least two sellers decreased their holdings by more than 10%.

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

1. RealPage (NASDAQ:RP) provides on demand software solutions for the rental housing industry in North America.

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Insider selling by insider (last 30 days)

  • Stephen Winn sold 17,403 shares on February 21 - March 13 pursuant to a Rule 10b5-1 trading plan. Stephen Winn currently controls 26,718,488 shares or 35.2% of the company. Stephen Winn has served as Chief Executive Officer, Chairman of the Board and a member of board of directors since November 1998.
  • William Chaney sold 22,500 shares on February 25 - March 14 and currently holds 48,121 shares or less than 0.1% of the company. William Chaney was appointed Executive Vice President, Enterprise Solutions in August 2012.
  • Jason Wright sold 1,500,000 shares on March 11 and currently controls 2,505,919 shares or 3.3% of the company. Jason Wright has served as a member of board of directors since December 2003.
  • Ashley Glover sold 32,527 shares on March 5-11 and currently holds 70,481 shares or less than 0.1% of the company. Ashley Glover has served as Chief Sales and Marketing Officer since January 2012.
  • Margot Carter sold 12,933 shares on March 8 and currently holds 56,256 shares or less than 0.1% of the company. Margot Carter is Executive Vice President, Chief Legal Officer and Secretary for RealPage.
  • Janine Jovanovic sold 3,586 shares on February 27 and currently holds 38,900 shares or less than 0.1% of the company. Janine Jovanovic was appointed Executive Vice President, Asset Optimization Solutions in August 2012.

Insider selling by calendar month

Here is a table of RealPage's insider trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
March 2013 1,564,068 0
February 2013 24,486 0
January 2013 12,011 0
December 2012 144,899 0
November 2012 111,382 0
October 2012 20,000 0
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The month of March 2013 has seen the most insider selling.

Financials

The company reported the full year 2012 financial results on February 20 with the following highlights:

Revenue $322.2 million
Net income $5.2 million
Cash $33.8 million
Debt $10.0 million
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Outlook

RealPage management expects to achieve the following results during its first quarter ended March 31, 2013:

  • Non-GAAP total revenue is expected to be in the range of $88.0 million to $89.5 million;
  • Adjusted EBITDA is expected to be in the range of $20.0 million to $21.0 million;
  • Non-GAAP net income is expected to be in the range of $9.6 million to $10.2 million, or $0.13 to $0.14 per diluted share;
  • Non-GAAP tax rate of approximately 40.0%; and
  • Weighted average shares outstanding of approximately 75.6 million.

RealPage management expects to achieve the following results during its calendar year ended December 31, 2013:

  • Non-GAAP total revenue is expected to be in the range of $382.0 million to $390.0 million;
  • Adjusted EBITDA is expected to be in the range of $90.0 million to $93.0 million;
  • Non-GAAP net income is expected to be in the range of $43.9 million to $45.7 million, or $0.57 to $0.60 per diluted share;
  • Non-GAAP tax rate of approximately 40.0%; and
  • Full year weighted average shares outstanding of approximately 76.7 million.

Competition

Here is a table comparing RealPage against the Application Software sector.

Company RP Industry Average (Application Software)
Market Cap: 1.48B 255.49M
Employees: 2,893 537.00
Qtrly Rev Growth (yoy): 0.21 0.22
Revenue: 322.17M 106.29M
Gross Margin: 0.60 0.70
EBITDA: 52.88M 5.62M
Operating Margin: 0.07 0.03
Net Income: 5.18M N/A
EPS: 0.07 0.00
P/E: 278.57 28.58
PEG (5 yr expected): 1.29 1.17
P/S: 4.66 3.30
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RealPage is trading above the industry average P/S ratio, which could explain some of the insider selling.

My analysis

There have been 14 insider sell transactions and there have not been any insider buy transactions during the last 30 days. The stock is trading at a P/E ratio of 278.57 and a forward P/E ratio of 26.00. The company has a book value of $3.36 per share. Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The three main reasons for the proposed short entry are high P/E ratio, relatively high P/S ratio and the intensive insider selling activity.

2. Medidata Solutions (NASDAQ:MDSO) provides cloud-based clinical development solutions for life sciences organizations in the United States and internationally.

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Insider selling by insider (last 30 days)

  • Steven Hirschfeld sold 5,000 shares on March 13 and currently holds 78,310 shares or 0.3% of the company. Steven Hirschfeld is Executive Vice President, Customer Operations.
  • Bryan Spielman sold 11,000 shares on March 4 and currently holds 19,862 shares or less than 0.1% of the company. Bryan Spielman is Executive Vice President, Strategy and Corporate Development.
  • Michael Otner sold 2,500 shares on February 27 and currently holds 24,624 shares or less than 0.1% of the company. Michael Otner is Executive Vice President, General Counsel.
  • Lineene Krasnow sold 18,690 shares on February 25 and currently holds 57,366 shares or 0.2% of the company. Lineene Krasnow is Executive Vice President, Product and Marketing.
  • Glen De Vries sold 56,547 shares on February 22 pursuant to a Rule 10b5-1 trading plan. Glen De Vries currently holds 725,383 shares or 2.8% of the company. Glen De Vries is President and one of the founders of Medidata Solutions.

Insider selling by calendar month

Here is a table of Medidata Solutions' insider trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
March 2013 16,000 0
February 2013 77,737 0
January 2013 0 0
December 2012 100,744 0
November 2012 499,000 0
October 2012 67,604 0
September 2012 107,300 0
August 2012 73,038 0
July 2012 65,000 0
June 2012 30,000 0
May 2012 30,000 0
April 2012 30,000 0
March 2012 87,000 0
February 2012 20,000 0
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There have been 1,203,423 shares sold and zero shares purchased since February 2012.

Financials

The company reported the full year 2012 financial results on February 21 with the following highlights:

Revenue $218.3 million
Net income $18.0 million
Cash $122.6 million
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Outlook

For the full year 2013, the company expects:

  • Revenues between $265.0 million and $270.0 million.
  • Professional services revenues in the high $40 million range.
  • Non-GAAP operating income between $57.0 million and $60.0 million. Based on current estimates, this would equate to GAAP operating income between $20.0 million and $23.0 million.
  • Adjusted non-GAAP net income, which includes the tax affected impact from stock-based compensation and amortization at a 40% effective tax rate, between $28.0 million and $31.0 million. Based on current estimates, this would equate to GAAP net income between $10.5 million and $13.5 million.

For the first quarter of 2013, the company expects:

  • Revenues between $60.5 million and $61.5 million.
  • Non-GAAP operating income between $11.0 million and $12.0 million. Based on current estimates this would equate to GAAP operating income between $4.0 million and $5.0 million.
  • Adjusted non-GAAP net income, which includes the tax effected impact from stock-based compensation and amortization at a 40% effective tax rate, between $5.0 million and $6.0 million. Based on current estimates, this would equate to GAAP net income between $2.0 million and $3.0 million.

Competition

Medidata's competitors include Oracle (NYSE:ORCL). Here is a table comparing these two companies.

Company MDSO ORCL Industry Average (Healthcare Information Services)
Market Cap: 1.38B 172.00B 45.22M
Employees: 796 115,000 482.00
Qtrly Rev Growth (yoy): 0.24 0.03 0.10
Revenue: 218.35M 37.23B 21.10M
Gross Margin: 0.71 0.80 0.55
EBITDA: 36.15M 17.30B 1.82M
Operating Margin: 0.13 0.38 0.02
Net Income: 18.02M 10.56B N/A
EPS: 0.71 2.13 N/A
P/E: 77.33 17.08 21.97
PEG (5 yr expected): 2.31 1.12 1.31
P/S: 6.26 4.62 2.50
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Medidata's P/S ratio is above the industry average, which could explain some of the insider selling.

My analysis

There have been five insider sell transactions and there have not been any insider buy transactions during the last 30 days. There are seven analyst buy ratings, two neutral ratings and one sell rating, with an average target price of $44.58. The stock is trading at a P/E ratio of 77.33 and a forward P/E ratio of 38.65. The company has a book value of $5.45 per share. Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The four main reasons for the proposed short entry are high P/E ratio, high P/S ratio, bearish analyst target prices and the intensive insider selling activity.

3. Xilinx (NASDAQ:XLNX) designs, develops, and markets programmable platforms worldwide. Its programmable platforms include integrated circuits in the form of programmable logic devices; software design tools; targeted reference designs; printed circuit boards; and predefined system functions delivered as intellectual property cores.

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Insider selling by insider (last 30 days)

  • Moshe Gavrielov sold 3,640 shares on March 15 pursuant to a Rule 10b5-1 trading plan. Moshe Gavrielov currently holds 70,378 shares or less than 0.1% of the company. Moshe Gavrielov serves as president and CEO of Xilinx.
  • Jon Olson sold 18,750 shares on March 1-5 pursuant to a Rule 10b5-1 trading plan. Jon Olson currently controls 40,587 shares or less than 0.1% of the company. Jon Olson is senior vice president and chief financial officer at Xilinx.
  • Jerald Fishman sold 5,000 shares on February 19 and currently holds 10,169 shares or less than 0.1% of the company. Jerald Fishman serves as a director of the company.
  • Scott Hover-Smoot sold 20,000 shares on February 20 and currently holds 6,478 shares or less than 0.1% of the company. Scott Hover-Smoot serves as vice president, general counsel and secretary.

Insider selling by calendar month

Here is a table of Xilinx's insider trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
March 2013 22,390 0
February 2013 48,640 0
January 2013 56,653 0
December 2012 3,640 0
November 2012 26,640 0
October 2012 8,742 0
September 2012 3,640 0
August 2012 27,637 0
July 2012 0 0
June 2012 7,280 0
May 2012 12,000 0
April 2012 3,640 0
March 2012 3,640 0
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There have been 224,542 shares sold and zero shares purchased since March 2012.

Financials

The company reported the third-quarter fiscal 2013, which ended December 29, 2012, financial results on January 17 with the following highlights:

Revenue $509.8 million
Net income $103.6 million
Cash $1.7 billion
Debt $918.9 million
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Outlook

March Quarter Fiscal 2013

  • Sales are expected to be up 2% to 6% sequentially.
  • Gross margin is expected to be approximately 66%.
  • Operating expenses are expected to be approximately $208 million, including $2 million of amortization of acquisition-related intangibles.
  • Other income and expense is expected to be an expense of approximately $7 million.
  • Fully diluted share count is expected to be approximately 274 million.
  • March quarter tax rate is expected to be approximately 13 - 14%.

Competition

Xilinx's competitors include Altera Corp. (NASDAQ:ALTR) and Lattice Semiconductor Corporation (NASDAQ:LSCC). Here is a table comparing these companies.

Company XLNX ALTR LSCC Industry Average (Semiconductor - Integrated Circuits)
Market Cap: 9.88B 11.05B 550.81M 386.76M
Employees: 3,265 3,129 739 1.06K
Qtrly Rev Growth (yoy): -0.00 -0.04 -0.06 0.13
Revenue: 2.20B 1.78B 279.26M 203.91M
Gross Margin: 0.66 0.70 0.54 0.46
EBITDA: 670.76M 628.10M 22.98M 14.77M
Operating Margin: 0.27 0.33 0.00 0.05
Net Income: 479.32M 556.81M -29.61M N/A
EPS: 1.76 1.72 -0.25 N/A
P/E: 21.45 20.09 N/A 22.71
PEG (5 yr expected): 2.36 1.89 4.13 0.90
P/S: 4.50 6.20 1.97 1.46
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Xilinx is trading above the industry average P/S ratio, which could explain some of the insider selling.

My analysis

There have been five insider sell transactions and there have not been any insider buy transactions during the last 30 days. The stock is trading at a P/E ratio of 21.45 and a forward P/E ratio of 19.07. The company has a book value of $10.78 per share and the stock has a dividend yield of 2.33%. Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are relatively high P/S ratio and the intensive insider selling activity.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within 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.