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In this article, I will feature one childcare company that has 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%.

Bright Horizons Family Solutions (NYSE:BFAM) provides child care and early education, and other services for employers and families.

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Insider selling during the last 30 days

  • Danroy Henry sold 103,882 shares on September 11-12, pursuant to a Rule 10b5-1 trading plan. Danroy Henry currently holds 59,502 options or less than 0.1% of the company. Danroy Henry is Chief Human Resource Officer. Danroy Henry decreased his holdings by 63.6% in September.
  • Sara Lawrence-Lightfoot sold 10,336 shares on September 11, pursuant to a Rule 10b5-1 trading plan. Sara Lawrence-Lightfoot currently holds zero shares of the company. Sara Lawrence-Lightfoot serves as a director of the company. Sara Lawrence-Lightfoot decreased her holdings by 100% in September.
  • Mary Ann Tocio sold 41,786 shares on September 11-12, pursuant to a Rule 10b5-1 trading plan. Mary Ann Tocio currently holds 179,466 shares and 494,790 options or 1.0% of the company. Mary Ann Tocio is President and Chief Operating Officer. Mary Ann Tocio decreased her holdings by 5.8% in September.

Insider selling by calendar month

Here is a table of Bright Horizons' insider-trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
September 2013156,0040
August 201300
July 201300
June 20139,586,8980
May 201300
April 201300
March 201300
February 201300
January 2013017,500

There have been 9,742,902 shares sold and there have been 17,500 shares purchased by insiders this year.

Financials

Bright Horizons reported the second-quarter financial results on August 8, with the following highlights:

Revenue$310.8 million
Net income$24.6 million
Cash$63.0 million
Net Debt$704 million

Outlook

Bright Horizons' outlook for 2013 is as follows:

  • Overall revenue growth in 2013 in the range of 12%-14%.
  • Adjusted EBITDA growth in 2013 in the range of 14%-17%.
  • Adjusted net income in 2013 in the range of $77 million to $79 million.
  • Diluted adjusted earnings per pro forma common share in 2013 in the range of $1.17 to $1.21.

Competition

Bright Horizons believes that it is a leader in the markets for employer-sponsored center-based child care and back-up dependent care and maintains approximately five times more market share in the United States than its closest competitors that provide employer-sponsored centers.

Bright Horizons' principal competitors for employer-sponsored centers include Knowledge Learning Corporation, Children's Choice, New Horizons, Kids Unlimited, Childbase and Busy Bees in the United States and the United Kingdom.

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Conclusion

There have been three different insiders selling Bright Horizons and there have not been any insiders buying Bright Horizons during the past 30 days. Two of these three insiders decreased their holdings by more than 10%. Bright Horizons has an insider ownership of 1.00%.

The stock is trading at a forward P/E ratio of 24.88 and the company has a book value of $12.55 per share.

The stock has a $23 price target from the Point and Figure chart. I believe there is an opportunity for a short entry with the $23 target price. I would place a stop loss at $38.50, which is the all-time high. The two main reasons for the proposed short entry are a bearish Point and Figure chart and the intensive insider selling activity.

Source: Insiders Are Selling Bright Horizons Family Solutions