5 Stocks With Low P/FCF Ratios Experiencing Insider Buying

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 |  Includes: CPF, ESI, STSA, UCBI, WBS
by: Kapitall

Keeping in mind that insiders often buy their company’s stock during times when it is undervalued, we decided to look at stocks with low Price/Free Cash Flow ratios that have experienced significant insider buying over the past six months.

To compile this list we looked at companies with market caps above $300M that are trading with a Price to Free Cash Flow ratio below five (i.e. P/FCF < 5). We then collected data on insider transactions, and came up with ten stocks that have seen a relatively significant increase in shares owned by insiders.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.


We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month.

(Click chart to expand)

In other words, free cash flow makes up more than 20% of each company's overall valuation, and insiders appear to be very excited about the company’s future prospects.

1. ITT Educational Services Inc. (NYSE:ESI): Education & Training Services Industry. Market cap of $2.49B. Price/Free Cash Flow at 4.53%. Net insider purchases over the last 6 months at 374000 shares, equivalent to 1.68% of the company's 22.29M share float. The stock is a short squeeze candidate, with a short float at 26.36% (equivalent to 8.45 days of average volume). The stock has had a couple of great days, gaining 13.46% over the last week.

2. Sterling Financial Corp. (NASDAQ:STSA): Savings & Loans Industry. Market cap of $996.0M. Price/Free Cash Flow at 4.25%. Net insider purchases over the last 6 months at 840934 shares, equivalent to 5.91% of the company's 14.23M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.23). The stock has lost 2.96% over the last year.

3. Webster Financial Corp. (NYSE:WBS): Regional Banks Industry. Market cap of $1.87B. Price/Free Cash Flow at 3.62%. Net insider purchases over the last 6 months at 2054850 shares, equivalent to 2.85% of the company's 72.12M share float. The stock is a short squeeze candidate, with a short float at 7.0% (equivalent to 11.65 days of average volume). The stock has lost 0.97% over the last year.

4. United Community Banks, Inc. (NASDAQ:UCBI): Regional Banks Industry. Market cap of $465.36M. Price/Free Cash Flow at 3.54%. Net insider purchases over the last 6 months at 165750 shares, equivalent to 2.92% of the company's 5.68M share float. The stock is a short squeeze candidate, with a short float at 24.07% (equivalent to 73.7 days of average volume). The stock has had a couple of great days, gaining 6.06% over the last week.

5. Central Pacific Financial Corp. (NYSE:CPF): Regional Banks Industry. Market cap of $606.06M. Price/Free Cash Flow at 3.31%. Net insider purchases over the last 6 months at 515500 shares, equivalent to 2.33% of the company's 22.16M share float. The stock has lost 29.07% over the last year.

*Insider data sourced from Yahoo! Finance, short float and performance data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.