Seeking Alpha
Long/short equity, insider ownership
Profile| Send Message|
( followers)  

In this article, I will feature one business services 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%.

Synnex Corporation (NYSE:SNX) provides distribution and business process outsourcing services to resellers, retailers, and original equipment manufacturers primarily in North America.

(click to enlarge)

Insider selling during the last 30 days

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

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Silver Star Developments10% OwnerOct 1-31317,488No5,551,764 shares5.4%
Dwight SteffensenDirectorOct 410,000No5,707 shares63.7%
Simon LeungSVPOct 14,246No19,330 shares + 2,661 options16.2%
Peter LarocquePresidentOct 115,000No44,916 shares + 3,983 options23.5%

There have been 346,734 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 Synnex' insider-trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
October 2013346,7340
September 201351,5440
August 20133,0000
July 20133,0000
June 20133,0000
May 20133,0000
April 20135,5080
March 201300
February 20132,0000
January 201327,0000

There have been 444,786 shares sold and there have been zero shares purchased by insiders this year. The month of October has seen the most insider selling.

Financials

Synnex reported the fiscal 2013 third-quarter, which ended August 31, financial results on September 25 with the following highlights:

Revenue$2.7 billion
Net income$46.6 million
Cash$153.9 million
Debt$233.3 million

Outlook

Synnex' guidance for the fiscal 2013 fourth quarter is as follows:

Revenue$2.925-$3.025 billion
Net income$43.0-$44.4 million
Diluted EPS$1.14-$1.18

Competition

Synnex' competitors include Arrow Electronics (NYSE:ARW), Ingram Micro (NYSE:IM), and Tech Data (NASDAQ:TECD). Here is a table comparing these companies.

CompanySNXARWIMTECD
Market Cap:2.27B4.81B3.64B1.96B
Employees:14,00016,50020,800N/A
Qtrly Rev Growth (yoy):0.060.030.120.05
Revenue:10.55B20.52B42.10B25.36B
Gross Margin:0.060.130.060.05
EBITDA:271.68M842.30M672.56M356.71M
Operating Margin:0.020.040.010.01
Net Income:154.39M446.13M299.73M214.59M
EPS:3.124.141.935.48
P/E:19.6711.5912.029.47
PEG (5 yr expected):1.490.960.861.32
P/S:0.220.230.090.08

Synnex has the highest P/E ratio among these four companies.

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

CompanyInsider buying / sharesInsider selling / shares
ARW0250,863
IM0992,026
TECD042,400

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

Conclusion

There have been four different insiders selling Synnex and there have not been any insiders buying Synnex during the past 30 days. Three of these four insiders decreased their holdings by more than 10%. Synnex has an insider ownership of 17.50%.

Synnex is trading at a P/E ratio of 19.67 and a forward P/E ratio of 13.20. Synnex has a book value of $36.96 per share.

Before entering short Synnex, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are relatively high P/E ratio and the intensive insider selling activity.

Source: Insiders Are Selling Synnex