In this article, I will feature one healthcare company that has seen intensive insider selling during the last 30 days. Intensive insider selling can be defined by the following three criteria:
- The stock was sold by three or more insiders within one month.
- The stock was not purchased by any insiders in the month of intensive selling.
- At least two sellers decreased their holdings by more than 10%.
Perrigo Company (NYSE:PRGO) develops, manufactures, and distributes over-the-counter and generic prescription pharmaceuticals, infant formulas, nutritional products, and active pharmaceutical ingredients.
Insider selling during the last 30 days
Here is a table of Perrigo's insider-trading activity during the last 30 days by insider.
|Name||Title||Trade Date||Shares Sold||Rule 10b5-1||Current Ownership||Decrease In Ownership|
|Judy Brown||CFO||Oct 1||1,416||Yes||17,433 shares||7.5%|
|Joseph Papa||CEO||Sep 24||15,000||Yes||116,655 shares + 3,963 options||11.1%|
|John Hendrickson||EVP||Sep 18||2,161||Yes||18,279 shares||10.6%|
There have been 18,577 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 Perrigo's insider-trading activity by calendar month.
|Month||Insider selling / shares||Insider buying / shares|
There have been 177,826 shares sold and there have been zero shares purchased by insiders this year.
Perrigo reported the fiscal 2013 full-year, which ended June 29, financial results on August 15 with the following highlights:
|Net income||$441.9 million|
Management expects standalone Perrigo full-year fiscal 2014 adjusted earnings per share to be in a range of $6.35 to $6.60 per diluted share, an increase of 13% to 18% from fiscal 2013's $5.61 per diluted share.
Management expects the acquisition of Elan Corporation to be at least $0.10 accretive to the adjusted earnings per share of standalone Perrigo in fiscal 2014 and between $0.70 and $0.80 accretive in fiscal 2015, including synergies.
Perrigo has the highest P/S ratio among these three companies, which could explain some of the insider selling.
There have been three different insiders selling Perrigo and there have not been any insiders buying Perrigo during the past 30 days. Two of these three insiders decreased their holdings by more than 10%. Perrigo has an insider ownership of 0.20%.
Perrigo is trading at a P/E ratio of 27.69 and a forward P/E ratio of 16.10. The company has a book value of $24.78 per share and the stock has a dividend yield of 0.28%.
Before entering short Perrigo, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are relatively high P/S ratio and the intensive insider selling activity.