2 Tech Stocks With Recent Intensive Insider Selling

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 |  Includes: CA, QLYS
by: Markus Aarnio

The Technology Select Sector SPDR ETF (NYSEARCA:XLK) was trading as low as $13.08 in March 2009. The index is currently trading at $31.93, or 144.1% above the low made in March 2009.

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In this article, I will feature two tech stocks that have seen intensive insider selling during the last 30 days. 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%.

1. CA Technologies (NASDAQ:CA) provides enterprise information technology [IT] management software and solutions that help customers manage and secure IT environments in the United States and internationally.

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Insider selling by insider (last 30 days)

  • Amy Fliegelman Olli sold 62,898 shares on June 25 pursuant to a Rule 10b5-1 trading plan. Amy Fliegelman Olli currently holds 78,105 shares or less than 0.1% of the company. Amy Fliegelman Olli is executive vice president and general counsel at CA Technologies.
  • George Fischer sold 21,000 shares on June 25 pursuant to a Rule 10b5-1 trading plan. George Fischer currently holds 96,968 shares or less than 0.1% of the company. George Fischer is executive vice president and group executive of worldwide sales and services at CA Technologies.
  • Jacob Lamm sold 23,747 shares on June 14-25 pursuant to a Rule 10b5-1 trading plan. Jacob Lamm currently holds 39,011 shares or less than 0.1% of the company. Jacob Lamm is executive vice president of Strategy and Corporate Development at CA Technologies.

Insider selling by calendar month

Here is a table of CA Technologies' insider trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
June 2013 122,645 0
May 2013 231,523 0
April 2013 0 0
March 2013 10,417 0
February 2013 0 0
January 2013 45,513 0
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There have been 410,098 shares sold and there have been 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 $4.6 billion
Net income $955 million
Cash $2.8 billion
Debt $1.4 billion
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Outlook

The company's fiscal year 2014 outlook is as follows:

  • GAAP diluted earnings per share decline in constant currency in a range of minus 11 percent to minus 6 percent. At March 31, 2013 exchange rates, this translates to GAAP reported diluted earnings per share of $1.84 to $1.94.
  • Non-GAAP diluted earnings per share growth in constant currency in a range of 16 percent to 20 percent. At March 31, 2013 exchange rates, this translates to reported non-GAAP diluted earnings per share of $2.93 to $3.03.
  • Cash flow from continuing operations decline in a range of minus 30 percent to minus 24 percent in constant currency. At March 31, 2013 exchange rates, this translates to reported cash flow from continuing operations of $970 million to $1.05 billion.
  • Total revenue outlook projects a decrease in a range of minus 4 percent to minus 2 percent in constant currency. At March 31, 2013 exchange rates, this translates to reported revenue of $4.43 billion to $4.52 billion.

Competition

CA Technologies' competitors include Hewlett-Packard Company (NYSE:HPQ), International Business Machines Corporation (NYSE:IBM) and Oracle (NYSE:ORCL). Here is a table comparing these companies.

Company CA HPQ IBM ORCL Industry Average (Business Software & Services)
Market Cap: 13.50B 50.53B 213.86B 146.70B 156.41M
Employees: 13,600 331,800 434,246 120,000 680.00
Qtrly Rev Growth: -0.03 -0.10 -0.05 0.00 0.16
Revenue: 4.64B 115.57B 103.24B 37.18B 121.55M
Gross Margin: 0.86 0.24 0.48 0.81 0.44
EBITDA: 1.67B 14.00B 26.40B 17.33B 8.88M
Operating Margin: 0.30 0.08 0.21 0.39 0.06
Net Income: 944.00M -13.40B 16.57B 10.92B N/A
EPS: 2.07 -6.85 14.50 2.26 0.11
P/E: 14.40 N/A 13.30 14.04 24.10
PEG (5 yr expected): 1.26 N/A 1.20 1.04 1.55
P/S: 2.90 0.44 2.07 3.97 1.91
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CA Technologies' P/S ratio is above the industry average.

My analysis

There have been three 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 0.10%. There is one analyst buy rating, 11 neutral ratings and one sell rating with an average target price of $26.40. The stock is trading at a P/E ratio of 14.40 and a forward P/E ratio of 11.69. The company has a book value of $12.14 per share and the stock has a dividend yield of 3.36%. 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 bearish analyst target prices, relatively high P/S ratio and the intensive insider selling activity.

2. Qualys (NASDAQ:QLYS) provides cloud security and compliance solutions.

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Insider selling by insider (last 30 days)

  • Philippe Courtot sold 55,798 shares on June 19 - July 10 pursuant to a Rule 10b5-1 trading plan. Philippe Courtot currently holds 6,286,469 shares or 20.0% of the company. Philippe Courtot is Chairman and CEO of the company.
  • Amer Deeba sold 14,032 shares on June 25 - July 11 pursuant to a Rule 10b5-1 trading plan. Amer Deeba currently holds 38,799 shares or 0.1% of the company. Amer Deeba is chief marketing officer of the company.
  • Sumedh Thakar sold 7,200 shares on June 25 - July 8 pursuant to a Rule 10b5-1 trading plan. Sumedh Thakar currently holds 3,689 options or less than 0.1% of the company. Sumedh Thakar is VP of Engineering at Qualys.
  • Donald McCauley sold 8,250 shares on June 25 pursuant to a Rule 10b5-1 trading plan. Donald McCauley currently holds 143,499 shares or 0.5% of the company. Donald McCauley is Chief Financial Officer at Qualys.
  • John Wilson sold 10,000 shares on June 25 pursuant to a Rule 10b5-1 trading plan. John Wilson currently holds 55,500 shares and 150,591 options or 0.7% of the company. John Wilson is Executive Vice President of World Wide Field Operations.
  • Peter Albert sold 10,000 shares on June 25 pursuant to a Rule 10b5-1 trading plan. Peter Albert currently holds 122,394 options or 0.4% of the company. Peter Albert is Vice President of Operations.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
July 2013 6,332 0
June 2013 139,950 0
May 2013 52,450 0
April 2013 0 0
March 2013 0 0
February 2013 0 0
January 2013 0 0
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There have been 198,732 shares sold and there have been zero shares purchased by the insiders this year.

Financials

The company reported the first-quarter financial results on May 6 with the following highlights:

Revenue $24.9 million
Net loss $0.6 million
Cash $92.6 million
Debt $1.7 million
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Outlook

  • Second Quarter 2013 Guidance: Management expects revenues to be in the range of $25.9 million to $26.4 million. GAAP net income (loss) per diluted share is expected to be in the range of a loss of $0.01 to an income of $0.01 and non-GAAP net income per diluted share is expected to be in the range of $0.02 to $0.04 based on approximately 35.4 million weighted average diluted shares outstanding for the quarter.
  • Full Year 2013 Guidance: Full year 2013 guidance remains unchanged with management expecting revenues to be in the range of $106 million to $108 million. GAAP EPS is expected to be in the range of $0.02 to $0.06 per diluted share and non-GAAP EPS is expected to be in the range of $0.16 to $0.20 per diluted share based on approximately 35.7 million weighted average diluted shares outstanding for the full year.

Competition

Qualys' competitors include Microsoft (NASDAQ:MSFT) and VeriSign (NASDAQ:VRSN). Here is a table comparing these companies.

Company QLYS MSFT VRSN
Market Cap: 507.07M 297.88B 6.94B
Employees: 363 94,000 1,054
Qtrly Rev Growth (yoy): 0.17 0.18 0.15
Revenue: 95.11M 76.01B 904.31M
Gross Margin: 0.79 0.75 0.81
EBITDA: 10.57M 30.37B 548.64M
Operating Margin: 0.03 0.36 0.54
Net Income: 758.00K 16.41B 330.89M
EPS: 0.04 1.94 2.05
P/E: 390.49 18.41 22.41
PEG (5 yr expected): 4.55 1.49 1.52
P/S: 5.45 3.92 7.68
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Qualys has the second highest P/S ratio among these three companies.

My analysis

There have been six different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. The stock is trading at a P/E ratio of 390.49 and a forward P/E ratio of 52.66. The company has a book value of $2.94 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. 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.