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Small cap companies are usually not followed by analysts, which makes choosing the right small-cap (market cap < $2 billion) more difficult. Choosing the right small companies to invest in can be daunting. However, insider purchases provide a good starting point. Insiders, especially executives and directors of small companies tend to know their company very well. Tracking their stock purchase activities can generate lucrative returns.

Below is a list of notable insider purchases of small-cap stocks filed at the Securities and Exchange Commission Monday. Following Seeking Alpha's small-cap policy, all the stocks in the table are greater than $1 per share or have a $100 million market cap. I have filtered out those transactions with a total value of less than $10,000.

I have written a short analysis of each company's financial records. However, these are not buying and selling recommendations.

Daktronics Inc. (NASDAQ:DAKT) is an industrial electrical equipment company. It has a market cap of $311.30 million. The company pays a dividend of 3.20%. According to today's (Monday) SEC filing, Daktronics has two insiders who purchased a total of 32,837 shares at the total value of $237,841. Multiple insider purchase occasions are usually a positive sign. Its P/E ratio of 36.30 is on the expensive side. The high PEG ratio suggests that the market expectation may be too high to become reality. Daktronics has an enterprise value / EBITDA ratio of 8.92. It has a profit margin of 1.73%. I don't like Daktronics' operating margin of 2.10%, a sign for the company's shaky financial health. The company had a net income of $8.49 million and EBITDA of $27.79 million on revenue of $489.53 million. The trading volume has been stable recently. This month, 1.20 million shares are being shorted. Comparing to 1.23 million shares shorted over the previous month, the shared short has decreased by 2%. The short ratio of Daktronics is 8.50, accounting for 3.30% of floating shares. Despite insider purchase, I'm not very positive about the company's prospect.

Eagle Bancorp, Inc. (NASDAQ:EGBN) is a mid-Atlantic bank. It has a market cap of $334.10 million. According to today's SEC filing, Eagle Bancorp has one insider who purchased a total of 2,000 shares at the total value of $31,500. Its stock price is 7.92% below 52-week high, a plus on the technical side. It has a reasonable P/E ratio of 12.77. Its price/book ratio is 1.47. It has a profit margin of 24.65%. I like Eagle Bancorp's operating margin of 41.42%, a good sign for the company's financial health. Both its revenue and earnings grew in double digits over the latest quarter, by 36.70% and 48.60%, respectively. The company has $142.15 million cash on its balance sheet. This month, 0.56 million shares are being shorted. The short ratio of Eagle Bancorp is 10.80, accounting for 3.40% of floating shares. I may put it on my watch list.

Limoneira Company (NASDAQ:LMNR) is a farm products company. It has a market cap of $193.50 million. The company pays a dividend of 0.70%. According to today's SEC filing, Limoneira Company has one insider who purchased a total of 1,000 shares at the total value of $17,292. Its P/E ratio of 67.20 is on the expensive side. Investors should use some caution because of this valuation. Limoneira Company has an enterprise value / EBITDA ratio of 43.13. The valuation is a little too expensive for my taste. It has a profit margin of 5.16%. Limoneira Company has a decent operating margin of 7.42%. The company had a net income of $2.86 million and EBITDA of $6.66 million on revenue of $60.42 million. The trading volume has been stable recently.

PICO Holdings Inc. (NASDAQ:PICO) is an accident & health insurance company. It has a market cap of $515.00 million. According to today's SEC filing, PICO Holdings has one insider who purchased a total of 898 shares at the total value of $20,160. Its price/book ratio is 1.03. PICO Holdings has an enterprise value / EBITDA ratio of 121.14. It is on the expensive side. I don't like PICO Holdings' operating margin of 3.12%, a sign for the company's shaky financial health. The company had a net income of $-57.33 million and EBITDA of $4.23 million on revenue of $83.49 million. Recently, the stock is not traded actively. This month, 0.84 million shares are being shorted. The short ratio of PICO Holdings is 10.40, accounting for 4.30% of floating shares. I'd avoid this company at this price level.

Pacific Sunwear of California Inc. (NASDAQ:PSUN) is an apparel stores company. It has a market cap of $131.30 million. According to today's SEC filing, Pacific Sunwear of California has one insider who purchased a total of 27,400 shares at the total value of $49,594. During recent weeks, Pacific Sunwear has had multiple insider purchase events. One concern is the company isn't profitable at this point. The company had a net income of $-77.59 million and EBITDA of $-20.61 million on revenue of $835.69 million. The company has $21.59 million cash on its balance sheet. Its debt burden is $74.18 million. Pacific Sunwear has to improve its performance enough to stop the money bleeding negative EBITDA. The trading volume has been stable recently. This month, 8.78 million shares are being shorted. Comparing to 8.20 million shares shorted over the previous month, the shared short has increased by 7%. The short ratio of Pacific Sunwear of California is 14.10, accounting for 23.10% of floating shares. Short squeeze could easily happen with suitable news like a positive EBITDA in quarterly earnings report.

Source: Small Cap Insider Buys For July 9th