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Small scale insider selling is not usually a problem. As Peter Lynch pointed out in his book, One Up On Wall Street, insiders sell for various reasons, which is usually not very informative unless they are dumping shares like there is no tomorrow. It often shows that they are not sufficiently confident about the future return of their company. Insiders, especially executives and directors of companies tend to know their company very well. Tracking their large-amount stock selling activities is a very good point to start for lucrative returns.

This article analyzes insider selling activities when they dump at least $1,000,000 worth of shares and 0.1% of the market cap during the past week, filed at the Securities and Exchange Commission. I have written a short analysis of each company. However, these are not buying and selling recommendations. It is nevertheless a good starting point to consider these stocks carefully.

Credit Acceptance Corp. (CACC) is a credit services company. It has a market cap of $2.47 billion. Its stock closed at $94.99 per share on Friday. Over the past week, Credit Acceptance has one insider who sold a total of 644,124 shares at the total value of $54,396,271. The shares sold account for 2.20% of the company's market cap. It has a reasonable P/E ratio of 12.79. Its price/book ratio is 4.18. It has a profit margin of 42.53% and operating margin of 67.10%. Both its revenue and earnings grew in double digits over the latest quarter, by 19.60% and 16.50%, respectively. Recently, the stock is not traded actively. This month, 0.30 million shares are being shorted. Comparing to 0.27 million shares shorted over the previous month, the shared short has increased by 11%. The short ratio of Credit Acceptance is 6.50, accounting for 7.50% of floating shares. This is likely a stock very low on my watch list.

Charles River Laboratories International, Inc. (CRL) is a biotechnology company. It has a market cap of $1.61 billion. Its stock closed at $32.80 per share on Friday. Over the past week, Charles River Laboratories International Inc. has 3 insiders who sold a total of 57,705 shares at the total value of $1,896,960. Multiple insider sales occasions are usually a negative sign. Its P/E ratio of 15.69 is on the expensive side. Investors should use some cautious because of this valuation. Its price/book ratio is 2.92. Charles River Laboratories International Inc. has an enterprise value / EBITDA ratio of 8.27. This is a reasonable valuation. Its profit margin was 9.16% over the past year. The company had a net income of $106.19 million and EBITDA of $272.13 million on revenue of $1.14 billion. The company has $67.17 million cash on its balance sheet. Its debt burden is $704.32 million, or approximately 127.02 in debt/equity ratio. Its operating cash flow was $209.21 million, and its free cash flow was $159.73 million. The trading volume is relatively normal. Overall this isn't a good short candidate.

The Ensign Group, Inc. (ENSG) is a long-term care facilities company. It has a market cap of $590.32 million. Its stock closed at $27.66 per share on Friday. Over the past week, The Ensign Group Inc. has one insider who sold a total of 40,000 shares at the total value of $1,112,600. It has a P/E ratio of 12.52. This company's value seems reasonable with a sub-one PEG ratio, suggesting its growth is outpacing its valuation. Its price/book ratio is 1.98. The Ensign Group Inc. has an enterprise value / EBITDA ratio of 6.52. Since EV/EBITDA ratio already considers the debt burden, the valuation is quite cheap. Its profit margin was 6.15% over the past year. The company had a net income of $47.83 million and EBITDA of $115.52 million on revenue of $777.49 million. Its revenue grew by 10.50%, and its net income improved by 1.20% during the most recent quarter. Trading is fairly active with this company lately, reflected in elevated volume. This month, 0.94 million shares are being shorted. The short ratio of The Ensign Group Inc. is 9.30, accounting for 5.30% of floating shares. Considering the insider sales and additional evidence, I'm not very positive about the company's prospect.

Family Dollar Stores Inc. (FDO) is a discount, variety stores company. It has a market cap of $7.88 billion. Its stock closed at $67.47 per share on Friday. Over the past week, Family Dollar Stores Inc. has one insider who sold a total of 227,000 shares at the total value of $15,975,352. Its stock price is 9.71% below 52-week high, a plus on the technical side. Its P/E ratio of 19.00 is on the expensive side. Investors should use some cautious because of this valuation. Its price/book ratio is 6.11. Family Dollar Stores Inc. has an enterprise value / EBITDA ratio of 9.48. This is a reasonable valuation. Its profit margin was 4.63% over the past year. I believe Family Dollar Stores Inc.'s operating margin of 7.55% is acceptable. The company had a net income of $421.16 million and EBITDA of $887.78 million on revenue of $9.1 billion. Its revenue grew by 9.60%, and its net income improved by 12.10% during the most recent quarter. The company has $141.91 million cash on its balance sheet. Its debt burden is $532.48 million, or approximately 40.57 in debt/equity ratio. Its operating cash flow was $474.42 million, and its free cash flow was $-133.30 million. Average trading volume is observed lately. This month, 3.45 million shares are being shorted. Comparing to 3.80 million shares shorted over the previous month, the shared short has decreased by 9%. The short ratio of Family Dollar Stores Inc. is 1.70, accounting for 3.50% of floating shares. The trailing dividend yield is 1.10. Over the past five years, the average yield is 1.70. This company's stock isn't appealing to own, but short selling it appears a risky play.

ICU Medical, Inc. (ICUI) is a medical instruments & supplies company. It has a market cap of $742.03 million. Its stock closed at $52.47 per share on Friday. Over the past week, ICU Medical Inc. has one insider who sold a total of 25,000 shares at the total value of $1,323,828. Its stock price is about 3.03% below its 52-week high, usually a positive technical indicator on the company. Its P/E ratio of 16.89 is on the expensive side. Investors should use some cautious because of this valuation. The PEG ratio is way above one, something to be cautious about. Its price/book ratio is 2.15. ICU Medical Inc. has an enterprise value / EBITDA ratio of 8.00. Since EV/EBITDA ratio already considers the debt burden, the valuation is quite cheap. It has a profit margin of 14.43%. The company had a net income of $44.20 million and EBITDA of $68.72 million on revenue of $306.23 million. Its revenue grew by 5.70%, and its net income declined by 5.80% during the most recent quarter. Its operating cash flow was $67.66 million, and its free cash flow was $60.86 million. The recent trading volume is below average. This month, 2.40 million shares are being shorted. Comparing to 2.36 million shares shorted over the previous month, the shared short has increased by 1%. The short ratio of ICU Medical Inc. is 27.30, accounting for 21.90% of floating shares. Such a high short ratio means two things: 1. the market is bearish about the stock in general, and 2. short squeeze could easily happen with suitable news. I cannot recommend short selling this company at this price level.

Middleby Corp. (MIDD) is a diversified machinery company. It has a market cap of $1.86 billion. Its stock closed at $99.60 per share on Friday. Over the past week, Middleby has one insider who sold a total of 100,000 shares at the total value of $10,000,000. Given that its price is only 4.98% lower than its 52-week high, the overall market sentiment appears positive. Its P/E ratio of 18.52 is on the expensive side. Investors should use some cautious because of this valuation. The PEG ratio is much lower than one. Its price/book ratio is 3.39. Middleby has an enterprise value / EBITDA ratio of 11.99. This is a reasonable valuation. Its profit margin was 11.06% over the past year. The company had a net income of $99.74 million and EBITDA of $176.71 million on revenue of $902.16 million. Both its revenue and earnings grew in double digits over the latest quarter, by 25.30% and 24.00%, respectively. Its operating cash flow was $150.69 million, and its free cash flow was $109.96 million. The trading volume is relatively normal. This month, 1.05 million shares are being shorted. Comparing to 0.95 million shares shorted over the previous month, the shared short has increased by 10%. The short ratio of Middleby is 11.20, accounting for 6.00% of floating shares. Such a high short ratio means short squeeze could easily happen with suitable news. I do not see enough evidence for establishing a position.

Toll Brothers Inc. (TOL) is a residential construction company. It has a market cap of $4.98 billion. Its stock closed at $29.71 per share on Friday. Over the past week, Toll Brothers Inc. has one insider who sold a total of 300,000 shares at the total value of $9,037,800. Its price shows near term strength, close to 52-week high (only 2.49% lower). Its P/E ratio of 71.08 is on the expensive side. Investors should use some cautious because of this valuation. The high PEG ratio suggests that the market expectation may be too high to become reality. Its price/book ratio is 1.89. Toll Brothers Inc. has an enterprise value / EBITDA ratio of 54.61. The valuation is a little too expensive for my taste. It has a profit margin of 4.69%. I believe Toll Brothers Inc.'s operating margin of 5.67% is acceptable. The company had a net income of $71.24 million and EBITDA of $109.55 million on revenue of $1.52 billion. The company has $927.47 million cash on its balance sheet. Its operating cash flow was $-317.65 million, and its free cash flow was $-555.67 million. The recent trading volume is below average. This month, 11.61 million shares are being shorted. Comparing to 12.37 million shares shorted over the previous month, the shared short has decreased by 6%. The short ratio of Toll Brothers Inc. is 2.60, accounting for 9.80% of floating shares.

Source: 7 Companies Dumped By Insiders