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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%.

The Advisory Board Company (NASDAQ:ABCO) provides best practices research and analysis, business intelligence and software tools, and management and advisory services to the health care and education industries in the United States and internationally.


(Click to enlarge)

Insider selling during the last 30 days

Here is a table of Advisory Board'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
Cormac Miller EVP Sep 23 - Oct 9 7,200 Yes 1,207 shares + 16,000 options 29.5%
David Felsenthal President Sep 23 - Oct 10 12,874 Yes 33,482 shares + 32,185 options 16.4%
Robert Musslewhite CEO Sep 20 23,205 Yes 33,692 shares + 86,409 options 16.2%
Mary Van Hoose CTO Sep 16 10,375 Yes 27,140 shares + 22,125 options 17.4%
Michael Kirshbaum CFO Sep 16 3,000 Yes 20,523 shares + 9,000 options 9.2%

There have been 56,654 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 Advisory Board's insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
October 2013 8,037 0
September 2013 64,044 0
August 2013 127,886 0
July 2013 76,049 0
June 2013 76,039 0
May 2013 108,675 0
April 2013 67,494 0
March 2013 28,298 0
February 2013 33,299 0
January 2013 20,424 0

There have been 610,245 shares sold and there have been zero shares purchased by insiders this year.

Financials

Advisory Board reported the fiscal 2014 first-quarter, which ended June 30, financial results on July 31 with the following highlights:

Revenue $123.2 million
Net income $3.7 million
Cash $40.2 million

Outlook

On July 31, Advisory Board updated its revenue guidance for calendar year 2013 to a range of approximately $500 million to $505 million, from a previous range of $495 million to $505 million. Advisory Board also updated its guidance for calendar year 2013 adjusted EBITDA and non-GAAP earnings per diluted share to reflect the impact of the recent acquisition. The company expects calendar year 2013 adjusted EBITDA to be in a range of approximately $87.5 million to $92.5 million, from a previous range of $90 million to $95 million, and non-GAAP earnings per diluted share to be in a range of approximately $1.15 to $1.25, from a previous range of $1.18 to $1.28.

Competition

Advisory Board's competitors include Accenture (NYSE:ACN), Huron Consulting Group (NASDAQ:HURN), and Navigant Consulting (NYSE:NCI). Here is a table comparing these companies.

Company ABCO ACN HURN NCI Industry Average (Business Services)
Market Cap: 2.34B 46.67B 1.24B 820.29M 254.91M
Employees: 2,400 275,000 2,652 2,542 769.00
Qtrly Rev Growth (yoy): 0.18 0.04 0.18 0.05 0.15
Revenue: 469.91M 28.56B 677.10M 752.44M 196.60M
Gross Margin: 0.48 0.33 0.40 0.34 0.37
EBITDA: 63.03M 4.66B 144.88M 122.83M 22.29M
Operating Margin: 0.10 0.14 0.18 0.13 0.06
Net Income: 22.01M 3.28B 56.24M 52.72M N/A
EPS: 0.60 4.93 2.49 1.03 0.07
P/E: 108.93 14.73 22.23 15.94 21.54
PEG (5 yr expected): 2.87 1.32 1.70 1.32 1.36
P/S: 4.98 1.63 1.83 1.09 1.90

Advisory Board has the highest P/S ratio among these four companies.

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

Company Insider buying / shares Insider selling / shares
ACN 20,000 138,493
HURN 0 73,863
NCI 0 80,000

Only Advisory Board has seen intensive insider selling during the past 30 days.

Conclusion

There have been five different insiders selling Advisory Board and there have not been any insiders buying Advisory Board during the past 30 days. Four of these five insiders decreased their holdings by more than 10%. Advisory Board has an insider ownership of 0.60%.

There are seven analyst buy ratings, four neutral ratings, and zero sell ratings with an average price target of $63.90. Advisory Board is trading at a P/E ratio of 108.93 and a forward P/E ratio of 41.99. The company has a book value of $8.19 per share.

Before entering short Advisory Board, I would like to get a bearish confirmation from the Point and Figure chart. The four main reasons for the proposed short entry are bearish analyst price targets, high P/S ratio, high P/E ratio and the intensive insider selling activity.

Source: Insiders Are Selling Advisory Board