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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%.

Pegasystems (NASDAQ:PEGA) develops, markets, licenses, and supports software to automate business processes primarily in the United States, the United Kingdom, and rest of Europe.

(click to enlarge)

Insider selling during the last 30 days

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

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
William WymanDirectorNov 26-272,500No5,147 shares32.7%
Leon TreflerSVPNov 26513No2,869 shares + 1,940 options9.6%
Efstathios KouninisVPNov 14-151,090No0 shares100%
Steven KaplanDirectorNov 148,086No

28,083 shares + 10,000 options

17.5%

There have been 12,189 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 Pegasystems' insider-trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
November 201312,1890
October 201300
September 20134,9550
August 20136,0600
July 201300
June 201300
May 201335,9130
April 201300
March 201326,3400
February 20135,6140
January 201300

There have been 91,071 shares sold and there have been zero shares purchased by insiders this year.

Financials

Pegasystems reported the third-quarter financial results on November 12 with the following highlights:

Revenue$122.0 million
Net income$8.7 million
Cash$188.4 million

Outlook

Pegasystems' license backlog totaled $268 million as of the end of the quarter, up $42 million or 19% from Q3 of last year.

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(Source: Investor presentation)

Competition

Pegasystems' competitors include Guidewire Software (NYSE:GWRE), and TIBCO Software (NASDAQ:TIBX). Here is a table comparing these companies.

CompanyPEGAGWRETIBX
Market Cap:1.94B2.72B3.87B
Employees:2,1601,1493,646
Qtrly Rev Growth (yoy):0.200.430.06
Revenue:499.40M300.65M1.05B
Gross Margin:0.700.560.71
EBITDA:80.88M21.67M195.10M
Operating Margin:0.120.060.15
Net Income:42.89M15.38M88.26M
EPS:1.100.250.53
P/E:46.52187.7245.34
PEG (5 yr expected):1.4017.252.08
P/S:3.828.993.69

Pegasystems has the second-lowest P/S ratio among these three companies.

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

CompanyInsider buying / sharesInsider selling / shares
GWRE03,068,851
TIBX01,237,932

Guidewire has also seen intensive insider selling during the last 30 days.

Conclusion

There have been four different insiders selling Pegasystems and there have not been any insiders buying Pegasystems during the last 30 days. Three of these four insiders decreased their holdings by more than 10%. Pegasystems has an insider ownership of 54.31%.

There is one analyst buy rating, three neutral ratings, and zero sell ratings with an average price target of $47.50. Pegasystems is trading at a P/E ratio of 46.52 and a forward P/E ratio of 33.95. The company has a book value of $6.72 per share and the stock has a dividend yield of 0.24%.

Before entering short Pegasystems, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are bearish analyst price targets, and the intensive insider-selling activity.

Source: Pegasystems: 4 Different Insiders Have Sold Shares This Month