2 Tech Stocks And 1 Services Company With Recent Intensive Insider Selling

|
 |  Includes: CSOD, MCK, NOW
by: Markus Aarnio

There was intensive insider selling in Savient Pharmaceuticals (SVNT) in February, when the stock was trading above $1. The stock is currently trading at $0.56 or 48.6% below the February peak.

Click to enlarge

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. McKesson Corporation (NYSE:MCK) delivers pharmaceuticals, medical supplies, and healthcare information technologies to the healthcare industry primarily in the United States.

Click to enlarge

Insider selling by insider (last 30 days)

  • Laureen Seeger sold 34,500 shares on May 22-24 pursuant to a Rule 10b5-1(c) trading plan. Laureen Seeger currently holds 34,500 options or less than 0.1% of the company. Laureen Seeger is Executive Vice President, General Counsel and Chief Compliance Officer of McKesson Corporation.
  • Brian Tyler sold 11,250 shares on May 10-20 pursuant to a Rule 10b5-1(c) trading plan. Brian Tyler currently holds 10,000 options or less than 0.1% of the company. Brian Tyler is Executive Vice President of Corporate Strategy and Business Development for McKesson Corporation.
  • Nigel Rees sold 8,000 shares on May 15 and currently holds 5,098 shares or less than 0.1% of the company. Nigel Rees is Vice President & Controller for McKesson Corporation.
  • John Hammergren sold 75,000 shares on May 10 pursuant to a Rule 10b5-1(c) trading plan. John Hammergren currently controls 590,256 shares or 0.3% of the company. John Hammergren is Chairman, President and Chief Executive Officer of McKesson Corporation.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
May 2013 128,750 0
April 2013 117,250 0
March 2013 160,817 0
February 2013 234,750 0
January 2013 53,750 0
Click to enlarge

There have been 695,317 shares sold and zero shares purchased by the insiders this year.

Financials

The company reported the full fiscal year 2013, which ended March 31, financial results on May 7 with the following highlights:

Revenue $122.5 billion
Net income $1.3 billion
Cash $2.5 billion
Debt $4.9 billion
Click to enlarge

Outlook

McKesson expects Adjusted Earnings per diluted share from continuing operations between $7.90 and $8.20 for the fiscal year ending March 31, 2014.

Competition

McKesson's competitors include AmerisourceBergen Corporation (NYSE:ABC), Cardinal Health (NYSE:CAH) and Owens & Minor (NYSE:OMI). Here is a table comparing these companies.

Company MCK ABC CAH OMI
Market Cap: 26.58B 12.57B 16.12B 2.20B
Employees: 43,500 13,400 32,500 6,500
Qtrly Rev Growth (yoy): -0.03 0.04 -0.09 0.03
Revenue: 122.46B 81.38B 102.44B 8.97B
Gross Margin: 0.06 0.03 0.05 0.11
EBITDA: 2.90B 1.41B 2.36B 249.99M
Operating Margin: 0.02 0.02 0.02 0.02
Net Income: 1.34B 706.22M 1.16B 105.03M
EPS: 5.59 2.30 3.35 1.67
P/E: 20.99 23.65 14.09 20.81
PEG (5 yr expected): 1.12 1.52 1.24 2.03
P/S: 0.22 0.15 0.16 0.25
Click to enlarge
Click to enlarge

McKesson's valuation is in line with its direct competitors'.

My analysis

There have been four different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. The company has an insider ownership of 0.04%. The stock is trading at a P/E ratio of 20.99 and a forward P/E ratio of 12.86. The company has a book value of $31.14 per share and the stock has a dividend yield of 0.68%. 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. Cornerstone OnDemand (NASDAQ:CSOD) provides talent management solutions delivered as software-as-a-service.

Click to enlarge

Insider selling by insider (last 30 days)

  • David Carter sold 10,301 shares on May 22 and currently holds 44,699 options or less than 0.1% of the company. David Carter is Senior Vice President of Sales for Cornerstone OnDemand.
  • Harold Burlingame sold 11,870 shares on May 22 and currently holds 33,250 shares or less than 0.1% of the company. Harold Burlingame has been a member of the board of directors since March 2006.
  • Steven Seymour sold 72,000 shares on May 22 and currently holds 829,266 shares or 1.6% of the company. Steven Seymour is co-founder and Executive Vice President of Strategic Accounts.
  • Adam Miller sold 42,800 shares on May 21-23 pursuant to a Rule 10b5-1 trading plan. Adam Miller currently controls 4,865,222 shares or 9.5% of the company. Adam Miller is the Founder and CEO of Cornerstone OnDemand.
  • Mark Baker sold 2,000 shares on May 10-20 and currently holds 56,356 shares or 0.1% of the company. Mark Baker has served as a member of the board of directors since October 2003.
  • Kirsten Helvey sold 26,400 shares on May 6-17 and currently holds 49,015 shares or 0.1% of the company. Kirsten Helvey is Senior Vice President, Client Success.
  • Mark Goldin sold 15,000 shares on May 10-17 and currently holds 68,021 options or 0.1% of the company. Mark Goldin is Chief Technology Officer for Cornerstone OnDemand.
  • Vincent Belliveau sold 34,000 shares on May 6-17 and currently holds 143,885 shares or 0.3% of the company. Vincent Belliveau is Cornerstone OnDemand's Senior Vice President and General Manager of Europe, Middle East and Africa [EMEA].

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
May 2013 214,371 0
April 2013 0 0
March 2013 368,483 0
February 2013 309,171 0
January 2013 0 0
Click to enlarge

There have been 892,025 shares sold and zero shares purchased by the insiders this year.

Financials

The company reported the first-quarter financial results on May 1 with the following highlights:

Revenue $37.7 million
Net loss $9.9 million
Cash $76.2 million
Debt $6.9 million
Click to enlarge

Outlook

The company's guidance is as follows:

  Q2/2013 FY2013
Revenue $41.5-$42.5 million $181-$183 million
Non-GAAP net loss N/A $9 million
Non-GAAP cash flow N/A $18 million
Click to enlarge

Competition

Cornerstone OnDemand's competitors include Saba Software (OTCPK:SABA). Here is a table comparing these two companies.

Company CSOD SABA Industry Average (Multimedia & Graphics Software)
Market Cap: 2.00B 263.60M 605.12M
Employees: 799 735 750.00
Qtrly Rev Growth (yoy): 0.57 0.04 1.19
Revenue: 131.57M 121.31M 180.59M
Gross Margin: 0.70 0.63 0.70
EBITDA: -28.29M -9.75M 30.87M
Operating Margin: -0.25 -0.12 0.10
Net Income: -33.21M -15.14M N/A
EPS: -0.66 -0.54 0.40
P/E: N/A N/A 7.03
PEG (5 yr expected): -4.40 -2.15 0.60
P/S: 15.35 2.22 2.40
Click to enlarge
Click to enlarge

Cornerstone OnDemand is trading above the industry average P/S ratio, which could explain some of the insider selling.

My analysis

There have been eight different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. The company has an insider ownership of 3.47%. The stock is trading at a forward P/E ratio of 1304.33. The company has a book value of $0.85 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, high P/S ratio and the intensive insider selling activity.

3. ServiceNow (NYSE:NOW) provides cloud-based services to automate enterprise information technology [IT] operations worldwide.

Click to enlarge

Insider selling by insider (last 30 days)

  • Frank Slootman sold 55,000 shares on May 1-22 and currently controls 160,000 shares or 0.1% of the company. Frank Slootman has served as ServiceNow's President and Chief Executive Officer, and as a director, since May 2, 2011.
  • Michael Scarpelli sold 122,308 shares on May 13-22 and currently holds 200,000 shares or 0.1% of the company. Michael Scarpelli has served as ServiceNow's Chief Financial Officer since August 2011.
  • Frederic Luddy sold 821,000 shares on May 1-21 and currently holds 9,329,138 shares or 6.9% of the company. Frederic Luddy has served as ServiceNow's Chief Product Officer since May 2011, after having founded ServiceNow in June 2004.
  • Charles Noell sold 445,998 shares on May 1-16 and currently holds 774,356 shares or 0.6% of the company. Charles Noell has served on the board of directors since February 2012.
  • Paul Barber sold 145,998 shares on May 1-14 and currently holds 649,362 shares or 0.5% of the company. Paul Barber has served on the board of directors since June 2005.
  • Daniel McGee sold 30,000 shares on May 15 pursuant to a Rule 10b5-1 trading plan. Daniel McGee currently holds 701,668 options or 0.5% of the company. Daniel McGee has served as ServiceNow's Senior Vice President of Engineering since August 2011.
  • David Schneider sold 50,000 shares on May 8-15 pursuant to a Rule 10b5-1 trading plan. David Schneider currently holds 1,050,694 options or 0.8% of the company. David Schneider has served as ServiceNow's Senior Vice President of Worldwide Sales and Services since June 2011.
  • Ronald Codd sold 20,000 shares on May 13 and currently holds 17,400 shares or less than 0.1% of the company. Ronald Codd has served on the board of directors since February 2012.
  • Arne Josefsberg sold 100,000 shares on May 1 pursuant to a Rule 10b5-1 trading plan. Arne Josefsberg currently holds 916,668 options or 0.7% of the company. Arne Josefsberg has served as ServiceNow's Chief Technology Officer since September 2011.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
May 2013 1,790,304 0
April 2013 407,500 0
March 2013 762,500 0
February 2013 1,782,406 0
January 2013 0 0
Click to enlarge

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

Financials

The company reported the first-quarter financial results on April 24 with the following highlights:

Revenue $85.9 million
Net loss $13.4 million
Cash $338.9 million
Click to enlarge

Outlook

For the second quarter of 2013, the company expects:

  • Total revenues between $94 million and $96 million, representing year-over-year growth between 66% and 69%.
  • A net loss per basic and diluted share between ($0.06) and ($0.04) with weighted-average shares outstanding of approximately 135 million.

For the full year 2013, the company expects revenues to be in the range of $394 million to $398 million, representing year-over-year growth between 62% and 63%.

Competition

ServiceNow's competitors include BMC Software (NASDAQ:BMC), CA Technologies (NASDAQ:CA) and International Business Machines (NYSE:IBM). Here is a table comparing these companies.

Company NOW BMC CA IBM
Market Cap: 5.08B 6.56B 12.42B 228.10B
Employees: 1,269 6,700 13,600 442,255
Qtrly Rev Growth (yoy): 0.81 0.01 -0.03 -0.05
Revenue: 282.22M 2.20B 4.64B 103.24B
Gross Margin: 0.60 0.73 0.86 0.48
EBITDA: -26.62M 612.10M 1.67B 26.40B
Operating Margin: -0.14 0.22 0.30 0.21
Net Income: -45.22M 331.00M 944.00M 16.57B
EPS: -0.45 2.13 2.07 14.50
P/E: N/A 21.38 13.24 14.19
PEG (5 yr expected): -18.83 0.97 1.20 1.18
P/S: 17.92 2.96 2.67 2.21
Click to enlarge
Click to enlarge

ServiceNow is trading at a higher P/S ratio than its direct competitors, which could explain some of the insider selling.

My analysis

There have been nine different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. The company has an insider ownership of 7.31% and the company has a book value of $2.08 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/S ratio, negative earnings 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.