Seeking Alpha
Long/short equity, insider ownership
Profile| Send Message|
( followers)  

In this article, I will feature one business services 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%.

Global Payments (NYSE:GPN) provides electronic payments transaction processing services for consumers, merchants, independent sales organizations, financial institutions, government agencies, and multi-national corporations in North America, South America, Europe and the Asia-Pacific region.

(click to enlarge)

Insider selling during the last 30 days

Here is a table of Global Payments' insider-trading activity during the last 30 days by insider.

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Suellyn TornayEVPOct 3-833,608No29,270 shares53.4%
Raymond KillianDirectorOct 415,398No10,419 shares59.6%
Paul GarciaDirectorOct 2154,000Yes571,903 shares21.2%

There have been 203,006 shares sold by insiders during the last 30 days. More details about the Rule 10b5-1 trading plan can be found from this link.

Insider selling by calendar month

Here is a table of Global Payments' insider-trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
October 2013203,0060
September 201300
August 20134,8605,000
July 201300
June 2013140,0000
May 201300
April 20134,4000
March 201300
February 201300
January 201313,3850

There have been 365,651 shares sold and there have been 5,000 shares purchased by insiders this year. The month of October has seen the most insider selling this year.

Financials

Global Payments reported the fiscal 2014 first-quarter, which ended August 31, financial results on October 1, with the following highlights:

Revenue$629.7 million
Net income$64.6 million
Cash$725.9 million
Debt$1.4 billion

Outlook

Annual fiscal 2014 GAAP diluted earnings per share is expected to be $3.40 to $3.47. Annual revenue is expected to be $2.51 billion to $2.56 billion, or 6% to 8% growth over fiscal 2013.

Competition

Global Payments' competitors include Vantiv (NYSE:VNTV), Total System Services (NYSE:TSS), and Heartland Payment Systems (NYSE:HPY). Here is a table comparing these companies.

CompanyHPYVNTVTSSGPN
Market Cap:1.46B3.74B5.60B4.03B
Employees:3,0022,6718,6003,954
Qtrly Rev Growth (yoy):0.060.110.030.07
Revenue:2.08B1.98B1.89B2.42B
Gross Margin:0.150.560.330.63
EBITDA:145.74M513.04M430.35M513.16M
Operating Margin:0.060.170.190.16
Net Income:68.31M108.04M235.15M234.09M
EPS:1.900.831.253.04
P/E:20.9933.0523.6518.21
PEG (5 yr expected):1.321.001.211.33
P/S:0.701.852.921.67

Global Payments has the second lowest P/S ratio among these four companies.

Here is a table of these competitors' insider-trading activities this year.

CompanyInsider buying / sharesInsider selling / shares
HPY4,000385,580
VNTV061,504,516
TSS01,267,441

Only Global Payments has seen intensive insider selling during the past 30 days.

Conclusion

There have been three different insiders selling Global Payments and there have not been any insiders buying Global Payments during the past 30 days. All three of these insiders decreased their holdings by more than 10%. Global Payments has an insider ownership of 0.80%.

Global Payments is trading at a P/E ratio of 18.21 and a forward P/E ratio of 12.57. Global Payments has a book value of $14.73 per share and the stock has a dividend yield of 0.14%.

Before entering short Global Payments, 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.

Source: Insiders Are Selling Global Payments