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In this article, I will feature one financial sector stock 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%.

Financial Engines (NASDAQ:FNGN) provides independent, technology-enabled portfolio management services, investment advice, and retirement income services to participants in employer-sponsored defined contribution plans.

(click to enlarge)

Insider selling during the last 30 days

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

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Christopher JonesEVPSep 23-Oct 1632,500Yes61,562 shares + 70,186 options19.8%
Raymond SimsCFOOct 3-1610,000Yes7,127 shares + 7,485 options40.6%
Anne TuttleEVPOct 153,800Yes6,278 shares37.7%
Jeffrey MaggioncaldaCEOSep 26-Oct 1030,000Yes280,655 shares + 42,954 options8.5%
Mary Lee SharpEVPOct 8729

Yes

0 shares + 21,688 options3.3%
Garry HalleeEVPSep 24-Oct 819,640Yes124,990 shares13.6%
Lawrence RaffonePresidentOct 37,500Yes35,61517.4%

There have been 104,169 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 Financial Engines' insider-trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
October 201356,6690
September 201394,7290
August 2013147,8330
July 2013139,7300
June 201396,2290
May 2013258,0360
April 2013116,7240
March 2013149,3120
February 2013216,2290
January 201396,0780

There have been 1,371,569 shares sold and there have been zero shares purchased by insiders this year.

Financials

Financial Engines reported the second-quarter financial results on August 1 with the following highlights:

Revenue$57.8 million
Net income$6.3 million
Cash$215.8 million

Outlook

Financial Engines estimates that its 2013 revenue will be in the range of $233 million to $238 million, and its 2013 non-GAAP adjusted EBITDA will be in the range of $75 million to $77 million.

Competition

Financial Engines' competitors include Ameriprise Financial (NYSE:AMP). Here is a table comparing these two companies.

CompanyFNGNAMPIndustry Average (Asset Management)
Market Cap:2.79B19.73B374.50M
Employees:38012,235219.00
Qtrly Rev Growth (yoy):0.310.090.17
Revenue:211.47M10.62B86.51M
Gross Margin:0.620.530.79
EBITDA:40.76M2.87B26.67M
Operating Margin:0.170.250.29
Net Income:23.77M1.22BN/A
EPS:0.465.710.15
P/E:122.2417.4914.90
PEG (5 yr expected):2.180.751.31
P/S :13.311.854.86

Financial Engines has higher P/S ratio than its direct competitor. Ameriprise Financial has seen 1,151,465 shares sold and zero shares purchased by insiders this year. Only Financial Engines has seen intensive insider selling during the past 30 days.

Conclusion

There have been seven different insiders selling Financial Engines and there have not been any insiders buying Financial Engines during the past 30 days. Five of these seven insiders decreased their holdings by more than 10%. Financial Engines has an insider ownership of 0.30%.

There are four analyst buy ratings, one neutral rating and zero sell ratings with an average price target of $52.50. The stock is trading at a P/E ratio of 122.24 and a forward P/E ratio of 64.51. The company has a book value of $5.93 per share and the stock has a dividend yield of 0.35%.

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

Source: Insiders Are Selling Financial Engines