1 Retailer, 1 Biotech And 1 Management Services Company With Recent Intensive Insider Selling

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 |  Includes: EXPO, IONS, PETM
by: Markus Aarnio

There was intensive insider selling in Kinross Gold (NYSE:KGC) in November 2012, at above $10.00. The stock is currently trading at $5.40 or 48.7% below the November 2012, highs.

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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. PetSmart (NASDAQ:PETM) operates as a specialty retailer of products, services, and solutions for pets in the United States, Puerto Rico, and Canada.

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Insider selling by insider (last 30 days)

  • Philip Francis sold 84,033 shares on March 25 - April 22 pursuant to a 10b5-1 trading plan. Philip Francis currently holds 144,589 shares or 0.1% of the company. Philip Francis serves as a director of the company.
  • Matthew McAdam sold 5,798 shares on April 1 and currently holds 6,102 options or less than 0.1% of the company. Matthew McAdam is Senior Vice President, Merchandising.
  • Joseph O'Leary sold 36,059 shares on March 27 - April 1 and currently holds 30,094 options or less than 0.1% of the company. Joseph O'Leary is Executive Vice President of Merchandising, Supply Chain, Marketing and Strategic Planning.
  • Lawrence Molloy sold 34,104 shares on March 27 and currently holds 39,375 options or less than 0.1% of the company. Lawrence Molloy is Executive Vice President and Chief Financial Officer.
  • Jaye Perricone sold 20,688 shares on March 27 and currently holds 9,539 shares or less than 0.1% of the company. Jaye Perricone is Senior Vice President, Real Estate.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
April 2013 64,964 0
March 2013 173,182 0
February 2013 0 0
January 2013 0 0
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There have been 238,146 shares sold and zero shares purchased this year.

Financials

The company reported the full year, which ended February 3, 2013, financial results on March 6 with the following highlights:

Revenue $6.8 billion
Net income $389.5 million
Cash $344.3 million
Debt $526.2 million
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Outlook

  • For 2013, the company anticipates comparable store sales growth of 2% to 4% and total sales growth of 2% to 4%. The company expects earnings per share to be between $3.76 to $3.92, and spending for capital expenditures projects to be between $140 million to $150 million.
  • For the first quarter of 2013, the company is expecting comparable store sales growth of 2% to 4%, and earnings per share to be between $0.92 to $0.98.

Competition

PetSmart's competitors include Target (NYSE:TGT) and Wal-Mart Stores (NYSE:WMT). Here is a table comparing these companies.

Company PETM TGT WMT
Market Cap: 6.89B 44.70B 260.40B
Employees: 24,000 361,000 2,200,000
Qtrly Rev Growth (yoy): 0.15 0.07 0.04
Revenue: 6.76B 73.30B 469.16B
Gross Margin: 0.31 0.29 0.25
EBITDA: 889.62M 7.51B 36.30B
Operating Margin: 0.10 0.07 0.06
Net Income: 389.53M 3.00B 17.00B
EPS: 3.55 4.52 5.02
P/E: 18.91 15.42 15.75
PEG (5 yr expected): 1.10 1.27 1.63
P/S: 1.02 0.60 0.55
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PetSmart is trading at a higher P/S ratio than its competitors.

My analysis

There have been eight 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 18.91 and a forward P/E ratio of 14.92. The company has a book value of $10.66 per share and the stock has a dividend yield of 0.99%. 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.

2. Isis Pharmaceuticals (ISIS) engages in the discovery and development of antisense drugs using antisense drug discovery platform.

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Insider selling by insider (last 30 days)

  • Patrick O'Neil sold 47,780 shares on April 12-23 pursuant to a Rule 10b5-1 trading plan. Patrick O'Neil currently holds 38,460 options or less than 0.1% of the company. Patrick O'Neil is Senior Vice President, Legal & General Counsel.
  • Lynne Parshall sold 90,000 shares on April 19-23 pursuant to a Rule 10b5-1 trading plan. Lynne Parshall currently holds 84,908 options or less than 0.1% of the company. Lynne Parshall is Director and Chief Operating Officer of Isis Pharmaceuticals.
  • Brett Monia sold 19,500 shares on April 19-22 pursuant to a Rule 10b5-1 trading plan. Brett Monia currently holds 17,000 options or less than 0.1% of the company. Brett Monia is a founding member of Isis and Senior Vice President of Antisense Drug Discovery.
  • Stanley Crooke sold 90,000 shares on April 19-23 pursuant to a Rule 10b5-1 trading plan. Stanley Crooke currently controls 837,226 shares or 0.8% of the company. Stanley Crooke is Founder, Chairman and Chief Executive Officer of Isis Pharmaceuticals.
  • Elizabeth Hougen sold 17,656 shares on April 22 pursuant to a Rule 10b5-1 trading plan. Elizabeth Hougen currently holds 23,074 options or less than 0.1% of the company. Elizabeth Hougen is Senior Vice President, Finance & CFO.
  • Richard Geary sold 9,042 shares on April 19-23 pursuant to a Rule 10b5-1 trading plan. Richard Geary currently holds 4,254 shares or less than 0.1% of the company. Richard Geary is Senior Vice President of Development at Isis Pharmaceuticals.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
April 2013 273,978 0
March 2013 126,856 0
February 2013 8,189 0
January 2013 7,859 0
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The month of April has seen the most insider selling this year.

Financials

The company reported the full year 2012 financial results on February 28 with the following highlights:

Revenue $102.0 million
Net loss $65.5 million
Cash $374.4 million
Debt $214.5 million
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Outlook

Isis expects to end 2013 with a pro forma net operating loss in the mid $60 million range. Isis is also projecting to end the year with more than $325 million in cash.

Upcoming milestones

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Competition

Isis believes that of the drugs that are in development or on the market, Kynamro's closest competitor is Juxtapid. In December 2012, the FDA approved Juxtapid as an oral, once-a-day treatment for patients with homozygous familial hypercholesterolemia [HoFH]. Juxtapid is a small molecule drug that Aegerion Pharmaceuticals (NASDAQ:AEGR) developed and commercialized to limit secretion of cholesterol and triglycerides from the intestines and the liver. The FDA approval for Juxtapid is supported by a Phase 3 study in 29 patients with homozygous FH. Aegerion states that the most common adverse reactions in the Phase 3 study were gastrointestinal, reported by 27 of 29 patients, or 93%. In earlier studies evaluating Juxtapid, patients discontinued use of Juxtapid at a high rate due to gastrointestinal adverse events, such as diarrhea, nausea and vomiting. In addition, some patients experienced elevations in liver enzymes and increased mean levels of fat in the liver, or hepatic fat, both of which Aegerion states it observed in its Phase 3 clinical trial of Juxtapid. Like Kynamro, Juxtapid is available only through a REMS program that restricts the access of Juxtapid to only patients with a clinical or laboratory diagnosis consistent with HoFH and both the Kynamro and Juxtapid labels contain a Boxed Warning citing the risk of liver toxicity.

My analysis

There have been eight insider sell transactions and there have not been any insider buy transactions during the last 30 days. There are four analyst buy ratings, four neutral ratings and one sell rating, with an average target price of $15.29. 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 bearish analyst target prices and the intensive insider selling activity.

3. Exponent (NASDAQ:EXPO) provides engineering and scientific consulting services worldwide.

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Insider selling by insider (last 30 days)

  • Elizabeth Anderson sold 6,403 shares on April 23 and currently holds zero shares of the company. Elizabeth Anderson is a Group Vice President.
  • John Moalli sold 6,900 shares on April 22 and currently holds 945 shares or less than 0.1% of the company. John Moalli is a Group Vice President.
  • Robert Caligiuri sold 5,000 shares on April 22 and currently holds 88,179 shares or 0.7% of the company. Robert Caligiuri is a Group Vice President.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
April 2013 18,303 0
March 2013 0 0
February 2013 10,000 0
January 2013 0 0
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The month of April has seen the most insider selling this year.

Financials

The company reported the first-quarter financial results on April 17 with the following highlights:

Revenue $72.7 million
Net income $8.0 million
Cash $111.0 million
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Outlook

The company expects 2013 revenues before reimbursements to be approximately flat with 2012. The company improved its 2013 outlook on EBITDA margin by 25 basis points to be down by 225 to 275 basis points as compared to the previous year. This guidance reflects the offsetting effects of reduced revenues from a few major assignments and defense work, with increased revenues from growth of the remaining business.

Competition

Exponent's competitors include National Technical Systems (NASDAQ:NTSC). Here is a table comparing these two companies.

Company EXPO NTSC
Market Cap: 719.79M 114.84M
Employees: 960 1,162
Qtrly Rev Growth (yoy): 0.09 0.23
Revenue: 267.30M 181.02M
Gross Margin: 0.35 0.26
EBITDA: 61.40M 25.75M
Operating Margin: 0.21 0.09
Net Income: 37.00M 4.19M
EPS: 2.59 0.35
P/E: 20.32 28.43
PEG (5 yr expected): 1.78 N/A
P/S: 2.69 0.63
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Exponent is trading at a higher P/S ratio than its competitor, which could explain some of the insider selling.

My analysis

There have been three 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 20.32 and a forward P/E ratio of 20.49. The company has a book value of $16.51 per share and the stock has a dividend yield of 1.14%. I believe there is an opportunity for a short entry with the $38 target price from the Point and Figure chart. I would place a stop loss at $58, which is the all time high. The three main reasons for the proposed short entry are bearish Point and Figure chart, relatively high P/S ratio and the intensive insider selling activity.

Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in EXPO 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.