Insiders Are Selling IPG Photonics

Oct.25.13 | About: IPG Photonics (IPGP)

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.

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Insider selling during the last 30 days

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

Name Title Trade Date Shares Sold Rule 10b5-1 Current Ownership Decrease In Ownership
Eugene Scherbakov SVP Oct 22 3,437 Yes 11,910 shares + 2,750 options 19.0%
Timothy Mammen SVP Oct 17 3,750 Yes 28,624 shares 11.6%
Valentin Gapontsev Trust I 10% Owner Oct 15 5,250 Yes 7,887,250 shares 0.1%
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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.

Month Insider selling / shares Insider buying / shares
October 2013 12,437 0
September 2013 36,815 0
August 2013 13,867 0
July 2013 14,250 0
June 2013 10,750 0
May 2013 6,750 0
April 2013 14,709 0
March 2013 0 0
February 2013 11,983 0
January 2013 21,754 0
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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
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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
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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.

Company IPGP COHR FANUY RSTI
Market Cap: 3.22B 1.59B 32.58B 741.54M
Employees: 2,400 2,328 5,261 2,242
Qtrly Rev Growth (yoy): 0.22 0.09 -0.23 0.06
Revenue: 611.43M 785.64M 5.93B 559.94M
Gross Margin: 0.53 0.40 0.47 0.35
EBITDA: 248.30M 116.14M 2.34B 64.18M
Operating Margin: 0.36 0.10 0.35 0.09
Net Income: 153.70M 58.39M 1.37B 35.02M
EPS: 2.94 2.39 1.17 1.23
P/E: 21.27 27.20 23.74 21.28
PEG (5 yr expected): 0.57 1.55 N/A 1.00
P/S: 5.31 2.02 5.47 1.31
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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.

Company Insider buying / shares Insider selling / shares
COHR 0 283,196
RSTI 0 125,000
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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.

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.