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In this article, I will feature one tech 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%.

IPG Photonics Corporation (NASDAQ:IPGP) develops and manufactures fiber lasers, fiber amplifiers, and diode lasers that are used in various applications, primarily in materials processing.

(click to enlarge)

Insider selling during the last 30 days

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

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Eugene ScherbakovSVPOct 223,437Yes11,910 shares + 2,750 options19.0%
Timothy MammenSVPOct 173,750Yes28,624 shares11.6%
Valentin Gapontsev Trust I10% OwnerOct 155,250Yes7,887,250 shares0.1%

There have been 12,437 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 IPG Photonics' insider-trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
October 201312,4370
September 201336,8150
August 201313,8670
July 201314,2500
June 201310,7500
May 20136,7500
April 201314,7090
March 201300
February 201311,9830
January 201321,7540

There have been 143,315 shares sold and there have been zero shares purchased by insiders this year.

Financials

IPG Photonics reported the second-quarter financial results on July 30 with the following highlights:

Revenue$168.2 million
Net income$41.7 million
Cash$369.5 million
Debt$15.2 million

Outlook

IPG Photonics' guidance for the third quarter of 2013 is as follows:

Revenue$165 million to $175 million
EPS$0.77 to $0.87

Competition

IPG Photonics' competitors include Coherent (NASDAQ:COHR), Fanuc (OTC:OTCPK:FANUY), and Rofin-Sinar Technologies (NASDAQ:RSTI). Here is a table comparing these companies.

CompanyIPGPCOHRFANUYRSTI
Market Cap:3.22B1.59B32.58B741.54M
Employees:2,4002,3285,2612,242
Qtrly Rev Growth (yoy):0.220.09-0.230.06
Revenue:611.43M785.64M5.93B559.94M
Gross Margin:0.530.400.470.35
EBITDA:248.30M116.14M2.34B64.18M
Operating Margin:0.360.100.350.09
Net Income:153.70M58.39M1.37B35.02M
EPS:2.942.391.171.23
P/E:21.2727.2023.7421.28
PEG (5 yr expected):0.571.55N/A1.00
P/S:5.312.025.471.31

IPG Photonics has the second-highest P/S ratio among these four companies.

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

CompanyInsider buying / sharesInsider selling / shares
COHR0283,196
RSTI0125,000

Only IPG Photonics has seen intensive insider selling during the past 30 days.

Conclusion

There have been three different insiders selling IPG Photonics and there have not been any insiders buying IPG Photonics during the past 30 days. Two of these three insiders decreased their holdings by more than 10%. IPG Photonics has an insider ownership of 15.60%.

IPG Photonics is trading at a P/E ratio of 21.27 and a forward P/E ratio of 17.30. The company has a book value of $15.86 per share.

Before entering short IPG Photonics, I would like to get a bearish confirmation from the Point and Figure chart. The main reason for the proposed short entry is the intensive insider selling activity.

Source: Insiders Are Selling IPG Photonics