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There was intensive insider selling in Elli Mae (NYSE:ELLI) on January 2 this year at above $28.50. The stock made the all time high on the same day (January 2). The stock plunged all the way to $18.61 on February 5 or 39.2% below the high made on January 2.

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With this episode in mind, I screened for stocks which 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 stocks that met these three criteria of intensive insider selling in the last 30 days.

1. Perry Ellis International (NASDAQ:PERY) engages in designing, sourcing, marketing, and licensing apparel products.

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Insider selling by insider (last 30 days)

  • Stephen Harriman sold 7,841 shares on March 27 - April 19 and currently holds 16,757 shares or 0.1% of the company. Stephen Harriman has led the company's bottoms business for more than a decade and became the division's president in February 2005.
  • Anita Britt sold 6,000 shares on April 9-10 and currently holds 11,880 shares or less than 0.1% of the company. Anita Britt has served as Chief Financial Officer of Perry Ellis International since joining the company in 2009.
  • Luis Paez sold 1,322 shares on March 27 and currently holds 10,107 shares or less than 0.1% of the company. Luis Paez joined Perry Ellis International in 1994 as MIS Director, and was promoted to Chief Information Officer in 2000.
  • Cory Shade sold 838 shares on March 27 and currently holds 7,755 shares or less than 0.1% of the company. Cory Shade has been Senior Vice President and General Counsel since October 2006.
  • John Voith sold 1,642 shares on March 27 and currently holds 13,397 shares or less than 0.1% of the company. John Voith is President, Golf and Sportswear.

Insider selling by calendar month

Here is a table of Perry Ellis' insider trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
April 201311,8000
March 20135,8430
February 201300
January 201300

The month of April has seen the most insider selling this year.

Financials

The company reported the full fiscal year 2013, which ended February 2, financial results on March 21 with the following highlights:

Revenue$969.6 million
Net income$14.8 million
Cash$55.0 million
Debt$174.2 million

Outlook

The company's guidance for the twelve months ending February 1, 2014 (fiscal 2014) is as follows:

  • The company expects revenue to increase in a range of 3% to 5% and fully diluted earnings per share on an adjusted basis to be in a range of $1.50 - $1.60.
  • On a GAAP basis, the company expects fully diluted earnings per share to be in a range of $1.60 - $1.70 which includes the sale of the John Henry trademark in Asia which closed in February 2013.

Competition

Perry Ellis' competitors include Fifth & Pacific Companies (FNP) and Ralph Lauren Corporation (NYSE:RL). Here is a table comparing these companies.

CompanyPERYFNPRLIndustry Average (Textile - Apparel Clothing)
Market Cap:270.27M2.45B15.34B270.28M
Employees:N/A5,80025,0003.45K
Qtrly Rev Growth (yoy):0.130.090.020.05
Revenue:969.55M1.51B6.92B969.55M
Gross Margin:0.330.560.590.33
EBITDA:53.80M29.66M1.34B14.52M
Operating Margin:0.04-0.020.160.03
Net Income:14.80M-59.46M717.20MN/A
EPS:0.97-0.687.600.22
P/E:18.18N/A22.2414.47
PEG (5 yr expected):0.6391.321.521.70
P/S:0.281.602.190.97

Perry Ellis' P/S ratio is below the industry average.

My analysis

There have been six 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 18.18 and a forward P/E ratio of 9.74. The company has a book value of $21.79 per share. I am not recommending in shorting this stock below the book value.

2. Ellie Mae provides business automation software for the mortgage industry in the United States.

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Insider selling by insider (last 30 days)

  • Alan Henricks sold 1,250 shares on April 12 pursuant to the Rule 10b5-1 trading plan. Alan Henricks currently holds zero shares of the company. Alan Henricks has served on the board of directors since April 2010 and as lead director since November 2012.
  • Jonathan Corr sold 6,500 shares on April 4 pursuant to the Rule 10b5-1 trading plan. Jonathan Corr currently holds 35,166 options or 0.1% of the company. Jonathan Corr has served as chief operating officer since November 2011 and was promoted to the additional position of president in February 2013.
  • Edgar Luce sold 5,000 shares on April 1 pursuant to the Rule 10b5-1 trading plan. Edgar Luce currently holds 2,814 shares or less than 0.1% of the company. Edgar Luce has served as chief financial officer since July 2005.
  • Sigmund Anderman sold 12,500 shares on April 1 pursuant to the Rule 10b5-1 trading plan. Sigmund Anderman currently holds 25,000 options or 0.1% of the company. Sigmund Anderman, one of the co-founders, has served as chief executive officer and as a member of the board of directors since the inception of the company in August 1997.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
April 201325,2500
March 201335,0670
February 201334,5000
January 201327,5000

There have been 122,317 shares sold and zero shares purchased this year.

Financials

The company reported the full year 2012 financial results on February 14 with the following highlights:

Revenue$101.8 million
Net income$19.5 million
Cash$60.4 million

Outlook

  • For the first quarter of 2013, revenue is expected to be in the range of $30.0 million to $30.5 million. Net income is expected to be in the range of $3.2 million to $3.5 million, or $0.11 to $0.13 per diluted share. Adjusted net income is expected to be in the range of $6.4 million to $6.8 million, or $0.23 to $0.24 per diluted share. Adjusted EBITDA is expected to be in the range of $9.5 million to $10.0 million.
  • For the full fiscal year 2013, revenue is expected to be in the range of $127.5 million to $129.0 million. Net income is expected to be in the range of $15.6 million to $16.2 million, or $0.55 to $0.57 per diluted share. Adjusted net income is expected to be in the range of $30.2 million to $31.0 million, or $1.06 to $1.09 per diluted share. Adjusted EBITDA is expected to be in the range of $44.2 million to $45.4 million.

Competition

Ellie Mae's competitors include Fiserv (NASDAQ:FISV). Here is a table comparing these two companies.

CompanyELLIFISVIndustry Average (Application Software)
Market Cap:609.72M11.66B2.83B
Employees:30820,000714.00
Qtrly Rev Growth (yoy):0.60-0.000.22
Revenue:101.85M4.48B533.64M
Gross Margin:0.770.420.78
EBITDA:25.97M1.34B83.98M
Operating Margin:0.210.240.25
Net Income:19.46M597.00MN/A
EPS:0.764.440.50
P/E:30.6819.6643.83
PEG (5 yr expected):1.011.151.74
P/S:5.912.565.56

Ellie Mae is trading at a slightly higher P/S ratio than the industry.

My analysis

There have been four 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 30.68 and a forward P/E ratio of 17.94. The company has a book value of $6.40 per share. 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.

3. PriceSmart (NASDAQ:PSMT) owns and operates membership shopping warehouse clubs in Latin America and the Caribbean.

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Insider selling by insider (last 30 days)

  • Sherry Bahrambeygui sold 11,717 shares on April 12-18 and currently controls 93,833 shares or 0.3% of the company. Sherry Bahrambeygui serves as a director of the company.
  • Robert Gans sold 4,612 shares on April 12 and currently controls 30,575 shares or 0.1% of the company. Robert Gans has been Executive Vice President, General Counsel and Secretary of the company since August 1997.
  • John Heffner sold 2,435 shares on April 15 and currently holds 36,863 shares or 0.1% of the company. John Heffner has been Executive Vice President and Chief Financial Officer of the company since January 2004.
  • William Naylon sold 4,000 shares on April 12 and currently holds 39,822 shares or 0.1% of the company. William Naylon has been Executive Vice President and Chief Operating Officer of the company since January 2002.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
April 201322,7640
March 201300
February 201324,6980
January 20132,1640

There have been 49,626 shares sold and zero shares purchased this year.

Financials

The company reported the fiscal 2013 second-quarter, which ended February 28, financial results on April 9 with the following highlights:

Revenue$607.4 million
Net income$24.9 million
Cash$101.2 million
Debt$79.2 million

Competition

PriceSmart's competitors include Wal-Mart Stores (NYSE:WMT). Here is a table comparing these two companies.

CompanyPSMTWMTIndustry Average (Discount, Variety Stores)
Market Cap:2.52B257.77B505.58M
Employees:5,7522,200,00013.10K
Qtrly Rev Growth (yoy):0.110.040.01
Revenue:2.17B469.16B1.96B
Gross Margin:0.160.250.32
EBITDA:143.45M36.30B77.37M
Operating Margin:0.060.060.02
Net Income:76.64M17.00BN/A
EPS:2.585.020.81
P/E:33.0315.6017.11
PEG (5 yr expected):1.721.601.50
P/S:1.140.540.26

PriceSmart 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 33.03 and a forward P/E ratio of 26.29. The company has a book value of $14.68 per share and the stock has a dividend yield of 0.70%. 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.

Source: 2 Retailers And A Software Company With Recent Intensive Insider Selling