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The services sector has been the second best performing group YTD with a gain of 19.4%.

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In this article I will feature two services sector companies that have seen intensive insider buying during the last 30 days. Intensive insider buying can be defined by the following three criteria:

  1. The stock is purchased by three or more insiders within one month.
  2. The stock is sold by no insiders in the month of intensive purchasing.
  3. At least two purchasers increase their holdings by more than 10%.

1. LivePerson (NASDAQ:LPSN) provides online engagement solutions that facilitate real-time assistance and expert advice in the United States, Canada, Latin America, Europe, and the Asia-Pacific region.

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Insider buying by insider (last 30 days)

  • Erica Schultz purchased 15,000 shares on May 17 and currently holds 15,000 shares or less than 0.1% of the company. Erica Schultz is Executive Vice President, Global Sales & Markets.
  • Daniel Murphy purchased 4,350 shares on May 16 and currently holds 4,350 shares or less than 0.1% of the company. Daniel Murphy is Chief Financial Officer of the company.
  • William Wesemann purchased 10,000 shares on May 16 and currently holds 50,000 shares or 0.1% of the company. William Wesemann serves as a director of the company.
  • Robert LoCascio purchased 35,640 shares on May 16 and currently holds 4,758,603 shares or 8.6% of the company. Robert LoCascio is the Founder and CEO of LivePerson.

Insider buying by calendar month

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

MonthInsider buying / sharesInsider selling / shares
May 201364,9900
April 201300
March 201300
February 201300
January 201300

The month of May has seen all of the insider buying this year.

Financials

The company reported the first-quarter financial results on May 8 with the following highlights:

Revenue$42.5 million
Net loss$0.2 million
Cash$94.8 million

Outlook

The company's guidance is as follows:

Second Quarter 2013

  • Revenue of $42.5 - $43.5 million
  • Adjusted EBITDA of $0.05 - $0.07 per share
  • Adjusted net income per share of $0.03 - $0.05
  • GAAP EPS of $(0.02) - $(0.04)
  • Fully diluted share count of approximately 58 million

Full Year 2013

  • Revenue of $174 - $179 million
  • Adjusted EBITDA of $0.32 - $0.35 per share
  • Adjusted net income per share of $0.18 - $0.21
  • GAAP EPS of $(0.02) - $(0.05)
  • Fully diluted share count of approximately 60 million

Competition

LivePerson's competitors include Microsoft Corporation (NASDAQ:MSFT) and SAP AG (NYSE:SAP). Here is a table comparing these companies.

CompanyLPSNMSFTSAPIndustry Average (Business Services)
Market Cap:513.33M286.18B90.48B1.89B
Employees:74894,00064,5984.00K
Qtrly Rev Growth (yoy):0.160.180.080.74
Revenue:163.15M76.01B21.33B3.05B
Gross Margin:0.770.750.720.34
EBITDA:14.25M30.49B7.22B423.52M
Operating Margin:0.030.360.280.17
Net Income:3.00M16.41B3.75BN/A
EPS:0.051.943.151.44
P/E:198.3017.6824.1111.99
PEG (5 yr expected):2.451.481.620.82
P/S:3.153.764.241.49

LivePerson's P/S ratio is below its direct competitors' but above the industry average.

My analysis

There have been four different insiders buying the shares and there have not been any insiders selling the shares during the last 30 days. The company has an insider ownership of 8.76%. There are seven analyst buy ratings, six neutral ratings and one sell rating with an average target price of $13.92. The stock is trading at a P/E ratio of 198.30 and a forward P/E ratio of 34.52. The company has a book value of $3.00 per share. I have a cautiously bullish bias for the stock currently based on the intensive insider buying.

2. Rona (OTC:RONAF) engages in the distribution and retail of hardware, home improvement, and gardening products in Canada.

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Insider buying by insider (last 30 days)

  • Robert Sawyer purchased 50,000 shares on May 16-22 and currently holds 50,000 shares or less than 0.1% of the company. Robert Sawyer was appointed President and CEO of Rona in March 2013.
  • James Pantelidis purchased 2,000 shares on May 16-17 and currently holds 3,000 shares or less than 0.1% of the company. James Pantelidis serves as a director of the company.
  • Stéphane Milot purchased 2,500 shares on May 17 and currently holds 2,500 shares or less than 0.1% of the company. Stéphane Milot is a Senior Officer of the company.
  • Paul Jovian purchased 500 shares on May 16 and currently holds 580 shares or less than 0.1% of the company. Paul Jovian joined Rona in 2009, as Senior Vice President Supply Chain.
  • Robert Chevrier purchased 25,000 shares on May 17 and currently holds 50,000 shares or less than 0.1% of the company. Robert Chevrier is Executive Chairman of the Board.

Insider buying by calendar month

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

MonthInsider buying / sharesInsider selling / shares
May 201380,0000
April 20134,4850
March 201321,4000
February 201300
January 201300

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

Financials

The company reported the first-quarter financial results on May 14 with the following highlights:

Revenue$929.4 million
Net loss$40.0 million
Cash$31.6 million
Debt$479.9 million

Outlook

Rona's results fluctuate significantly from one quarter to another due to the highly seasonal nature of renovation and construction activities. The strongest period of the year is from spring to fall, and over 80% of Rona's net annual earnings are generated in the second and third quarters. Furthermore, sales in the first quarter are always lower than in the other three, due to low activity levels in the renovation and construction sectors during the winter. Poor weather conditions can also have a major impact on sales. With the increase in the proportion of Rona's activities related to the retail sector, the seasonal impact of the first quarter has been more pronounced in 2011, 2012 and 2013 than in previous years. The second quarter is always the strongest of the year, followed by the third quarter.

Competition

The home renovation, hardware and gardening industry is highly competitive. Rona's competitors include large national and multinational chains, regional groups and independent stores.

Trends in the renovation and construction sectors have a direct impact on Rona. Rona's sales are related, to a certain extent, to the number of housing starts, home resales, consumer interest in renovation and housing costs. In addition, the demand for home renovation, hardware and gardening products relies on consumer tastes and emerging trends, which means Rona has to keep in close touch with customer needs and demands. Rona enjoys a solid diversification of its activities, by geography, segment, banner and store format.

My analysis

There have been five different insiders buying the shares and there have not been any insiders selling the shares during the last 30 days. The stock has a $16.5 price target from the Point and Figure chart. The stock is trading at a forward P/E ratio of 13.45. The company has a book value of $13.36 per share and the stock has a dividend yield of 1.30%. I believe the stock could be a good pick below the book value.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in OTC:RONAF 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.

Source: 2 Services Companies With Recent Intensive Insider Buying