Insiders Are Selling Eagle Materials

Oct.21.13 | About: Eagle Materials (EXP)

In this article, I will feature one industrial goods 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%.

Eagle Materials (NYSE:EXP) manufactures and distributes building products used in residential, industrial, commercial, and infrastructure construction in the United States.

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Insider selling during the last 30 days

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

Name Title Trade Date Shares Sold Rule 10b5-1 Current Ownership Decrease In Ownership
Craig Kesler CFO Oct 1 10,167 No 64,173 shares 13.7%
Robert Stewart EVP Sep 30 24,410 No 43,459 shares + 34,267 options 23.9%
Gerald Essl EVP Sep 27 19,046 No 49,770 shares + 9,523 options 24.3%
Steven Rowley CEO Sep 26-27 197,000 No 166,373 shares 54.2%
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There have been 250,623 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 Eagle Materials' insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
October 2013 10,167 0
September 2013 240,456 0
August 2013 0 1,000
July 2013 0 0
June 2013 0 0
May 2013 46,649 0
April 2013 0 0
March 2013 14,000 0
February 2013 121,691 0
January 2013 5,652 0
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There have been 438,615 shares sold and there have been 1,000 shares purchased by insiders this year.

Financials

Eagle Materials reported the fiscal 2014 first-quarter, which ended June 30, financial results on August 7 with the following highlights:

Revenue $227.0 million
Net income $30.1 million
Cash $6.7 million
Debt $497.3 million
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Outlook

The U.S. cement consumption outlook favors higher cement prices.

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Competition

Eagle Materials' competitors include USG Corporation (NYSE:USG). Here is a table comparing these two companies.

Company EXP USG
Market Cap: 3.71B 2.89B
Employees: 1,800 8,500
Qtrly Rev Growth (yoy): 0.47 0.15
Revenue: 715.56M 3.37B
Gross Margin: 0.18 0.14
EBITDA: 163.89M 318.00M
Operating Margin: 0.14 0.05
Net Income: 73.87M -68.00M
EPS: 1.52 -0.14
P/E: 49.31 N/A
PEG (5 yr expected): 3.18 3.01
P/S: 5.09 0.86
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Eagle Materials is trading at a higher P/S ratio than its direct competitor. USG Corporation has seen six insider sell transactions this year. Only Eagle Materials has seen intensive insider selling during the past 30 days.

Conclusion

There have been four different insiders selling Eagle Materials and there have not been any insiders buying Eagle Materials during the past 30 days. All four of these insiders decreased their holdings by more than 10%. Eagle Materials has an insider ownership of 1.10%.

Eagle Materials is trading at a P/E ratio of 49.31 and a forward P/E ratio of 17.01. The company has a book value of $14.82 per share and the stock has a dividend yield of 0.53%.

Before entering short Eagle Materials, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are 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.