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  • BAGL And TIS: Is Insider Buying Driving These Stocks? 0 comments
    Jul 16, 2014 9:42 AM | about stocks: BAGL, TIS

    Since insider buying is a strong indicator of big positive developments, it is an important metric to keep an eye on. Einstein Noah Restaurant Group (NASDAQ: BAGL) and Orchids Paper Products Company (NYSE: TIS) are examples of companies where insiders are buying shares.

    Colorado based Einstein Noah Restaurant Group operates bagel specialty restaurants in the United States. It is the largest chain of its kind and although it licenses, the majority of its top line is contributed by company-owned restaurant sales. During the latest quarter ended April 1, 2014, the company reported a 3.3 percent increase in revenues, although profits tumbled on higher fixed costs. However, the stock has gone up 5 percent over the last month, but still offers a generous annual dividend yield of 3.2 percent. Much of this growth is on the back of the expansion plans which entail opening between 75 and 85 new locations during the year.

    In recent months, company insiders have become net buyers, which is a great indicator of better things for shareholders. Although some news of the company's expansion plans is already factored into the stock price, late buying by insiders simply means the fruits of this labor are not too distant in the future. Meanwhile, valuations support the bullishness as a forward price earnings ratio of 15.1 is on the lower end of the industry spectrum.

    Orchids Paper Products Company makes tissue paper products for private labels as well as for the at-home market. Orchids Paper is the company behind brand names such as Colortex, My Size, Velvet, Big Mopper, Linen Soft and Soft & Fluffy, but it also sells to its customers' private labels. As a result of its flexible business model that allows contract manufacturing for others, the company has mitigated some of the risks associated with maintaining brands.

    Its business is growing steadily but profitability has effectively outpaced top line growth in recent years with annual earnings jumping from $5.9 million in 2010 to $13.3 million in 2013. Revenue growth remained intact in the latest quarter ended March and although higher costs of goods sold and increased income taxes put pressure on profitability, the stock has recovered smartly from the lows after the president and chairman started buying shares.

    There may be better times for investors in store as this dividend paying stock is attractive otherwise too. This includes a forward price earnings ratio of just 14.8, annual dividend yield of 4.4 percent and low debt equity ratio of just 0.2. Given the positives, analysts at Singular Research have recently increased their price target to $36 per share, reflecting a 12.5 percent potential upside from current levels.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: BAGL, TIS
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