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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%.

NetSuite (NYSE:N) provides cloud-based financials/enterprise resource planning (ERP) software suites in the United States and internationally.


(Click to enlarge)

Insider selling during the last 30 days

Here is a table of NetSuite'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
Douglas Solomon SVP Nov 15-Dec 11 3,879 Yes 21,257 shares 15.4%
Ronald Gill CFO Nov 15-Dec 11 12,957 Yes 37,820 shares 25.5%
Zach Nelson CEO Nov 15-Dec 3 14,489 Yes 889,091 shares 1.6%
James McGeever COO Nov 15-Dec 3 13,930 Yes 236,527 shares 5.6%
Evan Goldberg CTO Nov 15-Dec 4 24,828 Yes

2,818,573 shares

0.9%
Timothy Dilley EVP Nov 15-Dec 4 33,893 Yes 23,445 shares + 14,274 options 47.3%

There have been 103,976 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 NetSuite's insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
December 2013 70,236 0
November 2013 39,490 0
October 2013 55,077 0
September 2013 97,394 0
August 2013 72,650 0
July 2013 78,201 0
June 2013 112,765 0
May 2013 328,214 0
April 2013 177,733 0
March 2013 151,561 0
February 2013 386,332 0
January 2013 83,215 0

There have been 1,652,868 shares sold and there have been zero shares purchased by insiders this year.

Financials

NetSuite reported the third-quarter financial results on October 24 with the following highlights:

Revenue $106.9 million
Net loss $16.8 million
Cash $467.1 million
Debt $284.0 million

Outlook

NetSuite's guidance is as follows:

Q4/2013 FY2013 FY2014
Revenue $110.5-$111.5 million $410-$411 million $525-$535 million
Non-GAAP EPS $0.07 $0.25 N/A

Competition

NetSuite's competitors include salesforce.com (NYSE:CRM) and SAP AG (NYSE:SAP). Here is a table comparing these companies.

Company N CRM SAP Industry Average (Business Software & Services)
Market Cap: 6.98B 30.83B 96.81B 672.28M
Employees: 2,291 9,800 66,061 1.42K
Qtrly Rev Growth (yoy): 0.34 0.37 0.02 0.16
Revenue: 384.51M 3.76B 21.66B 297.99M
Gross Margin: 0.67 0.77 0.72 0.53
EBITDA: -31.30M -19.43M 7.58B 41.03M
Operating Margin: -0.13 -0.05 0.29 0.05
Net Income: -59.82M -136.40M 4.02B N/A
EPS: -0.82 -0.23 3.37 0.38
P/E: N/A N/A 24.10 24.21
PEG (5 yr expected): 14.48 5.77 1.30 1.95
P/S: 18.28 8.17 4.46 2.70

NetSuite has the highest P/S ratio among these three companies. In salesforce.com, there have been 1,855,575 shares sold and there have been zero shares purchased by insiders this year.

Conclusion

There have been six different insiders selling NetSuite and there have not been any insiders buying NetSuite during the last 30 days. Three of these six insiders decreased their holdings by more than 10%. NetSuite has an insider ownership of 5.50%.

NetSuite is trading at a forward P/E ratio of 332.53 and the company has a book value of $2.80 per share. NetSuite has a $72 price target from the Point and Figure chart. I believe there is an opportunity for a short entry with the $72 price target. I would place a stop loss at $114, which is the all-time high. The four main reasons for the proposed short entry are negative earnings, bearish Point and Figure chart, high P/S ratio, and the intensive insider-selling activity.

Source: NetSuite: 6 Different Insiders Have Sold Shares This Month