New form 4 filings with the SEC have revealed that Monolithic Power Systems, Inc. (Nasdaq: MPWR) insiders have been selling large quantities of stock since February 5th. With shares up 28.0% in the last 12 months, it’s worth taking a closer look at the company.
Insider Selling: Monolithic Power Systems
A number of top executives have been selling shares of Monolithic Power Systems according to filings with the SEC including Michael Hsing (CEO), Theodore Blegen (CFO), Saria Tseng (VP – General Counsel) and others. Total insider selling has totaled $25.0 million in the span of nine days.
|Insider Trading||Relationship||Date||#Shares||Value ($)|
|Theodore Blegen||CFO||Feb 13||7,261||$784,933|
|Theodore Blegen||CFO||Feb 12||7,564||$818,380|
|Deming Xiao||Pres. of Asia Operations||Feb 12||29,203||$3,159,595|
|Maurice Sciammas||V.P. of Sales & Marketing||Feb 12||29,497||$3,191,404|
|Michael Hsing||CEO||Feb 12||96,181||$10,406,226|
|Saria Tseng||VP & General Counsel||Feb 12||29,497||$3,191,404|
|Maurice Sciammas||V.P. of Sales & Marketing||Feb 05||4,057||$461,906|
|Deming Xiao||Pres. of Asia Operations||Feb 05||4,382||$498,909|
|Michael Hsing||CEO||Feb 05||17,354||$1,975,824|
|Saria Tseng||VP & General Counsel||Feb 05||4,057||$461,906|
Why Are Insiders Selling Shares?
Monolithic Power Systems designs and develops integrated power semiconductor solutions and power delivery architectures for the consumer, industrial, computing and storage, and communications market segments. The company was founded in 1997 and is headquartered in San Jose, California.
Analyzing Monolithic Power Systems’ valuation multiples provide further insight into why insiders may be selling their shares.
The company’s LTM EBITDA multiple of 48.1x is above all of its selected comparable public companies: MXL (30.4x), ADI (23.4x), DIOD (9.3x) and IDTI (20.1x). In addition, its forward EBITDA multiple of 34.2x is above all peers as illustrated in the chart below.
Furthermore, Monolithic Power Systems’ P/E multiples also trade at a significant premium to this same peer group.
The market is currently valuing the company’s stock at a premium relative to peers. This could imply more downside than upside moving forward which could potentially be the reason insiders are selling.
Monolithic Power Systems’s Stock Price and Valuation
The company’s shares last traded at $109.97 as of Wednesday, up 28.0% over the last year. While the stock has made impressive gains, the recent insider transactions could signal a troubling road ahead for shareholders.
In addition, finbox.io’s average fair value estimate of $88.81 implies -19.2% downside and is calculated from 10 valuation models as shown in the table below. Each analysis uses consensus Wall Street estimates for the projections when available.
|Analysis||Model Fair Value||Upside (Downside)|
|10-yr DCF Revenue Exit||$84.26||-23.4%|
|5-yr DCF Revenue Exit||$86.21||-21.6%|
|Peer Revenue Multiples||$67.05||-39.0%|
|10-yr DCF EBITDA Exit||$130.27||18.5%|
|5-yr DCF EBITDA Exit||$147.09||33.8%|
|Peer EBITDA Multiples||$67.77||-38.4%|
|10-yr DCF Growth Exit||$80.23||-27.0%|
|5-yr DCF Growth Exit||$78.78||-28.4%|
|Peer P/E Multiples||$75.77||-31.1%|
|Dividend Discount Model (multi-stage)||$70.70||-35.7%|
While individual buys and sells among insiders is not necessarily noteworthy, a major trend in buying or selling by corporate insiders could provide useful insights into the future prospects of a company. However, it is just one of many data points that an investor should consider before making an investment decision.
Here are a few additional items that you should consider before drawing a conclusion:
Valuation: what is Monolithic Power’s free cash flow yield and how does it compare to its publicly traded peers? It measures the amount of free cash flow for each dollar of equity (market capitalization). Analyze the free cash flow yield here.
Risk Metrics: what is Monolithic Power’s CapEx coverage? This is the amount a company outlays for capital assets for each dollar it generates from those investments. View the company’s CapEx coverage here.
Efficiency Metrics: how much free cash flow does Monolithic Power generate as a percentage of total sales? Has it been increasing or decreasing over time? Review the firm’s free cash flow margin here.
Author: Brian Dentino
Expertise: financial technology, analyzing market trends
Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors.
Brian can be reached at email@example.com.
As of this writing, Brian did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.