Insiders Are Selling Dick's Sporting Goods

Oct.21.13 | About: Dick's Sporting (DKS)

In this article, I will feature one sporting goods store 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%.

Dick's Sporting Goods (NYSE:DKS) operates as a sports and fitness retailer primarily in the Eastern United States.

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Insider selling during the last 30 days

Here is a table of Dick's Sporting Goods' insider-trading activity during the last 30 days by insider.

Name Title Trade Date Shares Sold Rule 10b5-1 Current Ownership Decrease In Ownership
John Duken EVP Sep 23 99,000 No 119,481 shares 45.3%
Joe Oliver SVP Sep 20-24 46,761 No 63,060 shares + 4,489 options 40.9%
Joe Schmidt COO Sep 20-24 75,000 No 91,394 shares 45.1%
Michele Willoughby EVP Sep 24 10,125 No 56,064 shares + 5,625 options 14.1%
David Mossé SVP Sep 20 6,000 No 36,084 shares 14.3%
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There have been 236,886 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 Dick's Sporting Goods' insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
September 2013 236,886 0
August 2013 0 6,400
July 2013 0 0
June 2013 0 0
May 2013 0 0
April 2013 0 0
March 2013 444,537 1,000
February 2013 0 0
January 2013 0 0
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There have been 681,423 shares sold and there have been 7,400 shares purchased by insiders this year.

Financials

Dick's Sporting Goods reported the second-quarter, which ended August 3, financial results on August 20 with the following highlights:

Revenue $1.5 billion
Net income $84.2 million
Cash $134.8 million
Debt $14.7 million
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Outlook

On August 20, Dick's Sporting Goods revised its full year guidance to a range of $2.60 to $2.65 per share, primarily due to lower sales expectations for the second half of the year, which are a result of the company's belief that consumers will remain relatively cautious.

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Competition

Dick's Sporting Goods' competitors include Hibbett Sports (NASDAQ:HIBB) and Big 5 Sporting Goods Corp. (NASDAQ:BGFV). Here is a table comparing these companies.

Company DKS HIBB BGFV Industry Average (Sporting Goods Stores)
Market Cap: 6.60B 1.48B 359.98M 1.48B
Employees: 11,100 2,600 9,000 2.60K
Qtrly Rev Growth (yoy): 0.07 0.13 0.06 0.02
Revenue: 5.98B 846.57M 981.55M 846.57M
Gross Margin: 0.32 0.36 0.33 0.36
EBITDA: 679.22M 133.88M 62.88M 133.88M
Operating Margin: 0.09 0.14 0.04 0.09
Net Income: 328.87M 75.08M 25.82M N/A
EPS: 2.61 2.84 1.18 2.84
P/E: 20.15 20.08 13.96 20.08
PEG (5 yr expected): 1.35 1.46 0.76 1.46
P/S: 1.09 1.75 0.37 1.75
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Dick's Sporting Goods has the second-highest P/S ratio among these three companies.

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

Company Insider buying / shares Insider selling / shares
HIBB 0 73,800
BGFV 0 920,537
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Only Dick's Sporting Goods has seen intensive insider selling during the past 30 days.

Conclusion

There have been five different insiders selling Dick's Sporting Goods and there have not been any insiders buying Dick's Sporting Goods during the past 30 days. All five of these insiders decreased their holdings by more than 10%. Dick's Sporting Goods has an insider ownership of 0.40%.

Dick's Sporting Goods is trading at a P/E ratio of 20.15 and a forward P/E ratio of 16.99. The company has a book value of $13.54 per share and the stock has a dividend yield of 0.95%.

Before entering short Dick's Sporting Goods, 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.

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.