Insiders Are Buying InnerWorkings

Nov.18.13 | About: InnerWorkings, Inc. (INWK)

In this article, I will feature one services sector stock that has seen intensive insider buying during the last 30 days. Intensive insider buying can be defined by the following three criteria:

  1. The stock is purchased by three or more insiders within one month.
  2. The stock is sold by no insiders in the month of intensive purchasing.
  3. At least two purchasers increased their holdings by more than 10%.

InnerWorkings (NASDAQ:INWK) provides print management and promotional solutions to corporate clients in the United States and internationally.

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Insider buying during the last 30 days

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

Name Title Trade Date Shares Purchased Current Ownership Increase In Shares
David Fisher Director Nov 13-14 18,000 35,806 shares +101.1%
Patrick Gallagher Director Nov 13 15,620 70,215 shares +28.6%
Sagard Capital Partners, L.P. 10% Owner Nov 11-13 710,700 7,015,225 shares +11.3%
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There have been 744,320 shares purchased by insiders during the last 30 days.

Insider buying by calendar month

Here is a table of InnerWorkings' insider-trading activity by calendar month.

Month Insider buying / shares Insider selling / shares
November 2013 744,320 0
October 2013 0 0
September 2013 0 15,000
August 2013 0 15,000
July 2013 0 15,000
June 2013 0 15,000
May 2013 13,000 15,000
April 2013 0 15,000
March 2013 0 15,000
February 2013 0 15,000
January 2013 0 15,000
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There have been 757,320 shares purchased and there have been 135,000 shares sold by insiders this year. The month of November has seen the most insider buying.

Financials

InnerWorkings reported the third-quarter financial results on November 6 with the following highlights:

Revenue $232.6 million
Net income $7.3 million
Cash $19.2 million
Debt $91.5 million
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Outlook

On November 6, InnerWorkings lowered its 2013 revenue guidance from a range of $910 million to $940 million to a range of $865 million to $880 million, representing 9% to 10% revenue growth over 2012. InnerWorkings also lowered its 2013 GAAP diluted earnings per share guidance from a range of $0.45-$0.50 to a range of $0.16-$0.20. The revisions were due primarily to the performance of productions graphics.

Competition

InnerWorkings' competitors include Quad/Graphics (NYSE:QUAD), and R.R. Donnelley & Sons Company (NASDAQ:RRD). Here is a table comparing these companies.

Company INWK QUAD RRD
Market Cap: 334.79M 1.19B 3.12B
Employees: 1,500 21,400 57,000
Qtrly Rev Growth (yoy): 0.16 0.16 0.04
Revenue: 855.81M 4.58B 10.38B
Gross Margin: 0.23 0.21 0.22
EBITDA: 24.26M 551.50M 1.13B
Operating Margin: 0.02 0.05 0.07
Net Income: 16.06M -10.00M -741.80M
EPS: 0.30 -0.24 -4.10
P/E: 21.90 N/A N/A
PEG (5 yr expected): 2.25 1.50 5.08
P/S: 0.39 0.26 0.29
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InnerWorkings is the only one profitable out of these three companies.

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

Company Insider buying / shares Insider selling / shares
QUAD 0 437,098
RRD 0 67,323
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Only InnerWorkings has seen intensive insider buying during the last 30 days.

Conclusion

There have been three different insiders buying InnerWorkings and there have not been any insiders selling InnerWorkings during the last 30 days. All three of these insiders increased their holdings by more than 10%.

There are five analyst buy ratings, zero neutral ratings, and zero sell ratings with an average price target of $8.67. InnerWorkings is trading at a P/E ratio of 21.90 and a forward P/E ratio of 15.28. The company has a book value of $4.56 per share.

InnerWorkings reported the third-quarter financial results on November 6, and the stock plunged on the following day due to the weak guidance. The insiders started buying the shares on November 11. I believe the stock could be a good pick at the book value based on the intensive insider buying.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in INWK over 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.