Cognizant Technology: 5 Different Insiders Have Sold Shares This Month

Jun.30.14 | About: Cognizant Technology (CTSH)

Summary

5 insiders sold Cognizant stock within one month.

The stock was not purchased by any insiders in the month of intensive selling.

4 of these 5 insiders decreased their holdings by more than 10%.

Cognizant Technology Solutions (NASDAQ:CTSH) provides information technology, consulting, and business process outsourcing services worldwide.

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Insider selling during the last 30 days

Here is a table of Cognizant's insider activity during the last 30 days.

Name Title Trade Date Shares Sold Option Exercise & Sale Rule 10b5-1 Current Ownership Decrease In Ownership
Gordon Coburn President June 4-24 31,014 Yes & No Yes 126,716
shares + 73,642 options
13.4%
Karen McLoughlin CFO June 6-17 8,793 No Yes 22,173
shares + 80,000 options
7.9%
Venkat Krishnaswamy EVP June 9 3,000 No No 22,066
shares
12.0%
Steven Schwartz EVP June 6 6,647 No Yes 0 shares 100%
Malcolm Frank EVP June 6 8,676 No Yes 1,553
shares
84.8%
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There have been 58,130 shares sold by insiders during the last 30 days. Gordon Coburn, Karen McLoughlin, Steven Schwartz, and Malcolm Frank sold their shares pursuant to a Rule 10b5-1 plan. 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 Cognizant's insider activity by calendar month.

Month Insider selling / shares Insider buying / shares
June 2014 58,130 0
May 2014 24,684 0
April 2014 0 0
March 2014 12,028 0
February 2014 51,635 0
January 2014 0 0
December 2013 146,360 0
November 2013 288,327 0
October 2013 118,371 0
September 2013 184,397 0
August 2013 2,751 0
July 2013 1,200 0
June 2013 1,498 7,500
May 2013 897 0
April 2013 0 0
March 2013

55,951

0
February 2013 4,937 0
January 2013 0 0
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(Note: Cognizant had a two-for-one stock split on March 7, 2014)

There have been 951,166 shares sold and there have been 7,500 shares purchased by insiders since January 2013.

Financials

Cognizant reported the first-quarter financial results on May 7 with the following highlights:

Revenue $2.4 billion
Net income $348.9 million
Cash $3.9 billion
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The five insiders sold their shares after these results.

Outlook

Cognizant's guidance is as follows:

Q2/2014 FY2014
Revenue $2.50-$2.53 billion at least $10.3 billion
Non-GAAP EPS $0.62 at least $2.54
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Competition

Cognizant's competitors include Infosys (NYSE:INFY), and Wipro (NYSE:WIT). Here is a table comparing these companies.

Company CTSH INFY WIT
Market Cap: 30.00B 30.69B 29.00B
Employees: 178,600 160,405 130,000
Qtrly Rev Growth (yoy): 0.20 0.08 0.23
Revenue: 9.24B 8.25B 7.20B
Gross Margin: 0.41 0.36 0.32
EBITDA: 1.96B 2.27B 1.61B
Operating Margin: 0.19 0.25 0.20
Net Income: 1.29B 1.75B 1.29B
EPS: 2.12 3.06 0.53
P/E: 23.31 17.55 22.17
PEG (5 yr expected): 1.22 1.08 1.47
P/S: 3.25 3.65 3.90
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Cognizant has the highest P/E ratio among these three companies.

Conclusion

There have been five different insiders selling Cognizant and there have not been any insiders buying Cognizant during the last 30 days. Four of these five insiders decreased their holdings by more than 10%. Cognizant has an insider ownership of 0.51%.

Cognizant has a $38 price target from the Point & Figure chart. I believe there is an opportunity for a short entry with the $38 price target. I would place a stop loss at $54, which is the all-time high. The three main reasons for the proposed short entry are a bearish Point & Figure chart, relatively high P/E ratio, and the intensive insider-selling activity.

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Disclosure: The author has no positions in any stocks mentioned, but may initiate a short position in CTSH over the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.