Insiders Are Buying Entropic Communications

In this article, I will feature one tech stock that has 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%.

Entropic Communications (NASDAQ:ENTR), a fabless semiconductor company, designs, develops, and markets semiconductor solutions to enable home entertainment.

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Insider buying during the last 30 days

  • Vahid Manian purchased 10,000 shares on August 27 and currently holds 17,500 shares or less than 0.1% of the company. Vahid Manian is Entropic's senior vice president of Global Operations. Vahid Manian increased his holdings by 133.3% in August.
  • Charlie Lesko purchased 7,500 shares on August 22 and currently holds 31,868 shares or less than 0.1% of the company. Charlie Lesko is Entropic's senior vice president of Worldwide Sales. Charlie Lesko increased his holdings by 30.8% in August.
  • Umesh Padval purchased 5,000 shares on August 9 and currently holds 59,187 shares or less than 0.1% of the company. Umesh Padval is Chairman of the Board. Umesh Padval increased his holdings by 9.2% in August.
  • Kenneth Merchant purchased 14,000 shares on August 8 and currently holds 118,418 shares or 0.1% of the company. Kenneth Merchant serves as a director of the company. Kenneth Merchant increased his holdings by 13.4% in August.
  • Patrick Henry purchased 10,000 shares on August 8 and currently controls 880,832 shares or 1.0% of the company. Patrick Henry is Entropic's president and chief executive officer. Patrick Henry increased his holdings by 1.1% in August.

Insider buying by calendar month

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

Month Insider buying / shares Insider selling / shares
August 2013 46,500 0
July 2013 0 0
June 2013 0 0
May 2013 45,000 0
April 2013 0 0
March 2013 0 0
February 2013 16,000 0
January 2013 0 0
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There have been 107,500 shares purchased and there have been zero shares sold by the insiders this year.

Financials

Entropic reported the second-quarter financial results on July 31 with the following highlights:

Revenue $70.6 million
Net loss (GAAP) $39.9 million
Net income (Non-GAAP) $0.6 million
Cash $165.8 million
Cash per share $1.82
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Entropic's revenue was down 15% from the second quarter of 2012.

Outlook

Entropic forecasts an approximately 20% sequential decline in revenue from Q2 to Q3.

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Competition

Entropic's competitors include Broadcom (BRCM) and LSI Corporation (NYSE:LSI). Here is a table comparing these three companies.

Company ENTR BRCM LSI
Market Cap: 360.46M 14.40B 4.11B
Employees: 693 11,300 5,080
Qtrly Rev Growth (yoy): -0.15 0.06 -0.11
Revenue: 324.59M 8.13B 2.38B
Gross Margin: 0.48 0.50 0.50
EBITDA: 2.99M 1.26B 340.60M
Operating Margin: -0.03 0.10 0.07
Net Income: -41.86M 411.00M 105.37M
EPS: -0.47 0.72 0.19
P/E: N/A 34.44 39.71
PEG (5 yr expected): -2.33 0.65 0.95
P/S: 1.11 1.77 1.72
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Entropic has the lowest P/S ratio among these three companies, which could explain some of the insider buying. Broadcom has seen 65 insider sell transactions this year. LSI Corporation has seen six insider sell transactions and one insider buy transaction this year.

Conclusion

There have been five different insiders buying Entropic and there have not been any insiders selling Entropic during the last 30 days. Three out of these five insiders increased their holdings by more than 10%. Comparing Entropic's insider buying to its competitors' insider selling, Entropic stands out as a winner.

There are two analyst buy ratings, eight neutral ratings and two sell ratings with an average target price of $4.33. Entropic has a book value of $3.18 per share, which could be a good entry point for the stock.

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.