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In this article, I will feature one medical device 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%.

Cyberonics (NASDAQ:CYBX) engages in the design, development, marketing, and sale of implantable medical devices to hospitals and ambulatory surgery centers.

(click to enlarge)

Insider selling during the last 30 days

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

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
David WiseSVPNov 1-2622,788No85,055 shares + 54,400 options14.0%
Mark VerrattiVPNov 25-2619,852No52,719 shares + 70,732 options13.9%
Gregory BrowneCFONov 18-268,216No80,942 shares + 64,516 options5.3%
Sherrie PerkinsVPNov 254,000No

24,161 shares + 24,042 options

7.7%
Darren AlchVPNov 251,250No18,874 shares + 24,791 options2.8%
Daniel MooreCEONov 5-1511,750Yes276,252 shares + 207,675 options2.4%
Randal SimpsonVPNov 15,000Yes48,285 shares + 72,887 options4.0%

There have been 72,856 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 Cyberonics' insider-trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
November 201372,8560
October 201325,2500
September 201317,5370
August 201347,1860
July 201324,9150
June 201367,9010
May 201315,0000
April 201310,0000
March 201323,2500
February 201312,3940
January 201312,0000

There have been 328,289 shares sold and there have been zero shares purchased by insiders this year. The month of November has seen the most insider selling.

Financials

Cyberonics reported the fiscal 2014 second-quarter, which ended October 25, financial results on November 21 with the following highlights:

Revenue$70.1 million
Net income$13.9 million
Cash$122.7 million

(click to enlarge)

(Source: Earnings presentation)

Outlook

Cyberonics' guidance for the fiscal year 2014 is as follows:

Net sales$281-$285 million
Adjusted net income$54-$56 million

(click to enlarge)

(Source: Earnings presentation)

Upcoming milestones

Cyberonics anticipates that AspireSR sales in Europe may commence toward the end of this fiscal year in a phased launch.

(click to enlarge)

(Source: Earnings presentation)

Competition

Cyberonics' competitors include Medtronic (NYSE:MDT), and St. Jude Medical (NYSE:STJ). Here is a table comparing these companies.

CompanyCYBXSTJMDT
Market Cap:1.87B17.05B57.26B
Employees:58115,00046,659
Qtrly Rev Growth (yoy):0.110.010.02
Revenue:270.02M5.45B16.76B
Gross Margin:0.910.730.75
EBITDA:88.87M1.72B5.69B
Operating Margin:0.310.260.29
Net Income:47.28M720.00M3.81B
EPS:1.702.453.74
P/E:40.4214.6815.32
PEG (5 yr expected):1.981.692.28
P/S:6.983.163.42

Cyberonics has the highest P/S ratio among these three companies.

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

CompanyInsider buying / sharesInsider selling / shares
STJ02,044,216
MDT4,800297,118

Only Cyberonics has seen intensive insider selling during the last 30 days.

Conclusion

There have been seven different insiders selling Cyberonics and there have not been any insiders buying Cyberonics during the last 30 days. Two of these seven insiders decreased their holdings by more than 10%. Cyberonics has an insider ownership of 2.80%.

Cyberonics is trading at a P/E ratio of 40.42 and a forward P/E ratio of 29.93. The company has a book value of $8.65 per share.

Before entering short Cyberonics, 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/S ratio, and 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.

Source: Cyberonics: 7 Different Insiders Have Sold Shares During The Last 30 Days