1 Casino, 1 Restaurant And 1 Software Company With Recent Intensive Insider Selling

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 |  Includes: JACK, N, PENN
by: Markus Aarnio

There was intensive insider selling in Agnico-Eagle Mines (NYSE:AEM) in January this year when the stock was trading above $50. The stock is currently trading at $32.96, or 34% below the January level.

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With this episode in mind, I screened with Prognolic 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. Penn National Gaming (NASDAQ:PENN) owns and manages gaming and pari-mutuel properties in the United States and Canada.

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Insider selling by insider (last 30 days)

  • Robert Ippolito sold 20,400 shares on April 9-24 pursuant to a rule 10b5-1 trading plan. Robert Ippolito currently holds 39,607 shares or less than 0.1% of the company. Robert Ippolito is Vice President, Secretary & Treasurer.
  • Jordan Savitch sold 165,000 shares on March 28 - April 19 pursuant to a rule 10b5-1 trading plan. Jordan Savitch currently holds 48,292 shares or less than 0.1% of the company. Jordan Savitch is Senior Vice President and General Counsel.
  • Thomas Burke sold 22,500 shares on April 18 pursuant to a rule 10b5-1 trading plan. Thomas Burke currently holds 47,254 shares or less than 0.1% of the company. Thomas Burke is Senior Vice President, Regional Operations.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
April 2013 202,678 0
March 2013 90,222 0
February 2013 48,524 500
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 18 with the following highlights:

Revenue $798.2 million
Net income $65.3 million
Cash $247.7 million
Debt $2.6 billion
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Outlook

The company's guidance for the second quarter and full year is as follows:

Q2/2013 FY2013
Revenue $793.2 million 3,137.8 million
Net income $69.6 million $263.8 million
Earnings per share $0.68 $2.56
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Competition

Penn National's competitors include Caesars Entertainment Corporation (NASDAQ:CZR), Churchill Downs (NASDAQ:CHDN) and MTR Gaming Group (MNTG). Here is a table comparing these companies.

Company PENN CZR CHDN MNTG Industry Average (Resorts & Casinos)
Market Cap: 4.56B 2.12B 1.25B 99.77M 2.06B
Employees: 20,003 68,000 2,300 2,600 16.00K
Qtrly Rev Growth (yoy): 0.08 -0.04 0.06 N/A 0.01
Revenue: 2.96B 8.59B 732.38M 490.00M 5.15B
Gross Margin: 0.42 0.47 0.26 0.36 0.59
EBITDA: 689.67M 1.79B 146.85M 93.41M 1.13B
Operating Margin: 0.15 0.10 0.12 0.13 0.14
Net Income: 157.60M -1.39B 57.76M -5.45M N/A
EPS: 1.93 -11.95 3.34 -0.20 0.22
P/E: 30.68 N/A 21.93 N/A 26.58
PEG (5 yr expected): 2.95 N/A 2.95 0.63 1.86
P/S: 1.53 0.24 1.70 0.20 2.43
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Penn National is trading below the industry average P/S ratio.

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 30.68 and a forward P/E ratio of 21.45. The company has a book value of $29.14 per share. Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The main reason for the proposed short entry is the intensive insider selling activity.

2. NetSuite (NYSE:N) provides cloud-based financials/enterprise resource planning (ERP) software suites in the United States and internationally.

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Insider selling by insider (last 30 days)

  • Deborah Farrington sold 100,000 shares on March 28 - April 24 pursuant to a Rule 10b5-1 trading plan. Deborah Farrington currently controls 328,279 shares or 0.4% of the company. Deborah Farrington serves as a director of the company.
  • Evan Goldberg sold 80,000 shares on April 1-22 pursuant to a Rule 10b5-1 trading plan. Evan Goldberg currently holds 2,791,988 shares or 3.8% of the company. Evan Goldberg is Founder, Chief Technology Officer and Chairman of the Board.
  • Ronald Gill sold 1,000 shares on April 9 pursuant to a Rule 10b5-1 trading plan. Ronald Gill currently holds 60,783 shares or less than 0.1% of the company. Ronald Gill is Chief Financial Officer of the company.
  • Timothy Dilley sold 19,000 shares on April 8 pursuant to a Rule 10b5-1 trading plan. Timothy Dilley currently holds 44,577 shares or less than 0.1% of the company. Timothy Dilley is Executive Vice President, Worldwide Services and Chief Customer Officer.
  • Douglas Solomon sold 500 shares on March 28 pursuant to a Rule 10b5-1 trading plan. Douglas Solomon currently holds 32,619 shares or less than 0.1% of the company. Douglas Solomon is Senior Vice President, General Counsel & Secretary.
  • James McGeever sold 5,174 shares on March 28 pursuant to a Rule 10b5-1 trading plan. James McGeever currently holds 277,408 shares or 0.4% of the company. James McGeever is Chief Operating Officer.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
April 2013 152,400 0
March 2013 151,561 0
February 2013 386,332 0
January 2013 83,215 0
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There have been 773,508 shares sold and zero shares purchased this year.

Financials

The company reported the first-quarter financial results on April 25 with the following highlights:

Revenue $91.6 million
Net loss $13.0 million
Cash $190.7 million
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Outlook

The company's outlook for the full year and the second quarter is as follows:

2Q/2013 FY2013
Revenue $100-$101 million $404-$408 million
Non-GAAP EPS $0.02 $0.26-$0.27
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Competition

NetSuite's competitors include salesforce.com (NYSE:CRM) and SAP AG (NYSE:SAP). Here is a table comparing these companies.

Company N CRM SAP Industry Average (Business Software & Services)
Market Cap: 5.95B 23.87B 92.91B 1.88T
Employees: 1,778 9,800 64,422 124.00
Qtrly Rev Growth (yoy): 0.33 0.32 0.08 0.21
Revenue: 308.83M 3.05B 21.33B 37.15B
Gross Margin: 0.69 0.78 0.71 0.80
EBITDA: -16.08M 83.99M 7.19B 17.29B
Operating Margin: -0.10 -0.04 0.28 0.01
Net Income: -35.23M -270.45M 3.75B N/A
EPS: -0.50 -0.48 3.16 0.03
P/E: N/A N/A 24.87 395.15
PEG (5 yr expected): 9.76 2.79 1.49 N/A
P/S: 19.27 7.83 4.36 50.57
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NetSuite is trading below the industry average P/S ratio.

My analysis

There have been 11 insider sell transactions and there have not been any insider buy transactions during the last 30 days. There are nine analyst buy ratings, 15 neutral ratings and one sell rating, with an average target price of $73.83. The stock is trading at a forward P/E ratio of 188.95 and the company has a book value of $2.18 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 the negative earnings, bearish analyst target prices and the intensive insider selling activity.

3. Jack in the Box (NASDAQ:JACK), a restaurant company, operates and franchises Jack in the Box quick-service restaurants and Qdoba Mexican Grill fast-casual restaurants in the United States.

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Insider selling by insider (last 30 days)

  • Linda Lang sold 443,800 shares on March 28 - April 25 pursuant to a Rule 10b5-1 Plan. Linda Lang currently holds 279,985 shares or 0.6% of the company. Linda Lang has been Chairman of the Board and Chief Executive Officer since October 2005.
  • Jerry Rebel sold 70,000 shares on April 1 pursuant to a Rule 10b5-1 Plan. Jerry Rebel currently holds 88,036 shares or 0.2% of the company. Jerry Rebel has been Executive Vice President and Chief Financial Officer since October 2005.
  • Phillip Rudolph sold 20,000 shares on March 27 pursuant to a Rule 10b5-1 Plan. Phillip Rudolph currently holds 72,088 shares or 0.2% of the company. Phillip Rudolph has been Executive Vice President since February 2010 and General Counsel and Corporate Secretary since November 2007.

Insider selling by calendar month

Here is a table of Jack in the Box's insider trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
April 2013 348,054 0
March 2013 225,746 0
February 2013 0 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 fiscal 2013 first-quarter, which ended January 20, financial results on February 20 with the following highlights:

Revenue $465.5 million
Net income $20.7 million
Cash $9.5 million
Debt $395.9 million
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Outlook

Second quarter fiscal year 2013 guidance

  • Same-store sales are expected to be approximately flat at Jack in the Box company restaurants versus a 5.6 percent increase in the year-ago quarter.
  • Same-store sales are expected to be flat to down 2 percent at Qdoba company restaurants versus a 3.8 percent increase in the year-ago quarter.

Fiscal year 2013 guidance

  • Same-store sales are expected to increase approximately 1.5 to 2.5 percent at Jack in the Box company restaurants.
  • Same-store sales are expected to increase approximately 1.0 to 2.0 percent at Qdoba company restaurants.
  • Capital expenditures are expected to be $95 to $105 million.
  • Operating earnings per share, which the company defines as diluted earnings per share from continuing operations on a GAAP basis excluding restructuring charges and gains from refranchising, are expected to range from $1.48 to $1.63 in fiscal 2013 as compared to operating earnings per share of $1.20 in fiscal 2012.

Competition

Jack in the Box's competitors include Burger King Worldwide (BKW), McDonald's (NYSE:MCD) and Yum! Brands (NYSE:YUM). Here is a table comparing these companies.

Company JACK BKW MCD YUM Industry Average (Restaurants)
Market Cap: 1.56B 6.33B 101.22B 30.29B 942.67M
Employees: 22,100 10,870 440,000 78,450 17.05K
Qtrly Rev Growth (yoy): 0.02 -0.30 0.01 0.01 0.08
Revenue: 1.55B 1.97B 27.63B 13.63B 539.61M
Gross Margin: 0.23 0.42 0.39 0.27 0.21
EBITDA: 222.39M 639.00M 9.84B 2.87B 47.93M
Operating Margin: 0.08 0.27 0.30 0.16 0.09
Net Income: 74.97M 117.70M 5.47B 1.60B N/A
EPS: 1.48 0.33 5.39 3.38 0.46
P/E: 24.32 54.73 18.72 19.88 30.73
PEG (5 yr expected): 1.73 1.28 1.98 1.84 1.13
P/S: 1.01 3.22 3.66 2.22 0.88
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Jack in the Box's valuation is in line with 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 24.32 and a forward P/E ratio of 17.86. The company has a book value of $9.77 per share. Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The main reason for the proposed short entry is 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.

Business relationship disclosure: I am a paid advisor for prognolic.com, whose service has been mentioned in this article.