Insiders Are Selling Microsemi

Oct.27.13 | About: Microsemi Corporation (MSCC)

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%.

Microsemi Corporation (NASDAQ:MSCC) engages in the design, manufacture, and marketing of analog and mixed-signal integrated circuits primarily in the United States, Europe, and Asia.

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Insider selling during the last 30 days

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

Name Title Trade Date Shares Sold Rule 10b5-1 Current Ownership Decrease In Ownership
Paul Pickle EVP Oct 16-23 30,001 Yes 63,333 shares 32.1%
Dennis Leibel Director Oct 16 3,750 Yes 33,872 shares + 59,750 options 3.9%
Ralph Brandi EVP Sep 27-Oct 15 66,833 Yes 65,000 shares + 271,666 options 16.6%
Steven Litchfield EVP Sep 27-Oct 14 32,530 Yes 58,900 shares + 255,000 options 9.4%
Thomas Anderson Director Oct 9 1,000 Yes 13,616 shares 6.9%
John Hohener CFO Sep 27-Oct 9 33,600 Yes 63,970 shares 34.4%
James Peterson CEO Sep 27-Oct 9 103,333 Yes 236,963 shares 30.4%
David Goren SVP Sep 27-Oct 9 25,600 Yes 38,600 shares 39.9%
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There have been 296,647 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 Microsemi's insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
October 2013 138,980 0
September 2013 174,500 0
August 2013 29,208 0
July 2013 73,460 0
June 2013 31,000 0
May 2013 11,500 0
April 2013 3,000 0
March 2013 26,000 0
February 2013 24,198 0
January 2013 0 0
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There have been 511,846 shares sold and there have been zero shares purchased by insiders this year. The month of September has seen the most insider selling this year.

Financials

Microsemi reported the fiscal 2013 third-quarter, which ended June 30, financial results on July 25 with the following highlights:

Revenue $242.6 million
Net income $18.3 million
Cash $220.9 million
Debt $699.8 million
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Outlook

Microsemi expects net sales in the fourth quarter of fiscal year 2013 to increase 2 percent to 4 percent, sequentially, and expects non-GAAP diluted earnings per share of between $0.51 and $0.55.

Competition

Microsemi's competitors include Altera Corp. (NASDAQ:ALTR), Aeroflex Holding Corp. (NYSE:ARX), and Xilinx (NASDAQ:XLNX). Here is a table comparing these companies.

Company MSCC ALTR ARX XLNX
Market Cap: 2.33B 10.58B 679.54M 11.98B
Employees: 3,200 3,129 2,700 3,329
Qtrly Rev Growth (yoy): -0.06 -0.10 0.02 0.10
Revenue: 988.64M 1.72B 647.14M 2.22B
Gross Margin: 0.56 0.69 0.51 0.68
EBITDA: 212.29M 544.15M 120.10M 727.53M
Operating Margin: 0.09 0.29 0.06 0.29
Net Income: 41.18M 461.94M -104.25M 532.75M
EPS: 0.46 1.43 -1.23 1.91
P/E: 54.62 23.18 N/A 23.32
PEG (5 yr expected): 1.07 1.98 1.17 1.66
P/S: 2.34 6.00 1.05 5.42
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Microsemi has the second-lowest 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
ALTR 0 211,223
ARX 0 0
XLNX 0 1,536,208
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Only Microsemi has seen intensive insider selling during the past 30 days.

Conclusion

There have been eight different insiders selling Microsemi and there have not been any insiders buying Microsemi during the past 30 days. Five of these eight insiders decreased their holdings by more than 10%. Microsemi has an insider ownership of 0.70%.

Microsemi is trading at a P/E ratio of 54.62 and a forward P/E ratio of 10.14. The company has a book value of $11.09 per share. Before entering short Microsemi, 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.