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INVESTING IDEAS - page 160

Discover and validate investing ideas with valuation models and charts.

Insider Buying: First Eagle’s Adding To Its Intevac Stake

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Insider Buying: Intevac

First Eagle Investment Management bought 45,508 shares of Intevac (NasdaqGS: IVAC) worth $0.3 million on Friday, February 02. First Eagle is considered an Intevac insider due to the fact that the investment firm currently owns more than 10% of the company’s outstanding shares.

In fact, First Eagle Investment Management has bought nearly $1 million worth of stock since the end of January according to recent Form 4 filings with the SEC. This is a fairly significant amount considering Intevac’s total market capitalization is only $142 million.

Recent Intevac Insider Transactions
Insider Trading Relationship Date #Shares Value ($)
First Eagle Investment Managem 10% Owner Feb 02 45,508 $298,668
First Eagle Investment Managem 10% Owner Feb 01 400 $2,590
First Eagle Investment Managem 10% Owner Jan 31 61,485 $419,973
First Eagle Investment Managem 10% Owner Jan 30 26,698 $180,662
TOTAL 134,091 $901,893

First Eagle now owns $26.8 million worth of stock or nearly 20% of the company’s equity.


Potential Reasons For Insider Activity

Intevac provides vacuum deposition equipment for various thin-film applications, and digital night-vision technologies and products to the defense industry in the United States, Asia, and Europe. The company sells its products through direct sales force and distributors. Intevac was founded in 1990 and is headquartered in Santa Clara, California.

Analysts covering the stock often compare the company to a peer group that includes MRV Communications (NasdaqCM: MRVC), NeoPhotonics (NYSE: NPTN), 3D Systems (NYSE: DDD) and Amtech Systems (NasdaqGS: ASYS). Analyzing Intevac’s valuation metrics and ratios relative to these peers provides further insight into why First Eagle is adding to its holdings.

A company’s projected 5-year revenue CAGR is the average annual growth rate of revenue over a five year period. It’s calculated as follows:

5yr CAGR = [ Revenue FY+5 / Revenue FY ] ^ (1/5 years) - 1.

The chart below plots the projected five-year revenue CAGR for Intevac and it’s peers.

IVAC Proj Rev CAGR vs Peerssource: finbox.io

The company’s expected sales growth of 16.2% is above all of its selected peers: MRVC (0.0%), NPTN (0.6%), DDD (4.8%) and ASYS (7.9%).

Intevac’s impressive investor return is another why First Eagle may be purchasing the stock. Return on Assets (ROA) represents the dollars in earnings or Net Income a company generates per dollar of assets. ROA is typically used to gauge the efficiency of the company and its management at deploying capital to generate income for shareholders. It is calculated as follows:

ROA = Adjusted Net Income / Average Total Assets.

In general, a higher return on assets suggests management is utilizing the asset base efficiently.

IVAC ROA vs Peers Chart

source: finbox.io

The company’s ROA of 6.3% is above all of its selected comparable public companies: MRVC (-14.4%), NPTN (-9.5%), DDD (-6.0%) and ASYS (5.9%).


Stock Price and Valuation

The company’s shares last traded at $6.35 as of Monday, down -32.0% over the last year. Although the stock has traded lower, could the recent insider transactions signal a promising road ahead for shareholders?

Intevac Valuation Detail
Analysis Model Fair Value Upside (Downside)
10-yr DCF Revenue Exit $10.09 58.8%
5-yr DCF Revenue Exit $10.96 72.6%
Peer Revenue Multiples $8.85 39.4%
10-yr DCF EBITDA Exit $10.60 67.0%
5-yr DCF EBITDA Exit $11.77 85.3%
Peer EBITDA Multiples $9.33 47.0%
10-yr DCF Growth Exit $8.78 38.3%
5-yr DCF Growth Exit $8.92 40.5%
Peer P/E Multiples $6.52 2.7%
Earnings Power Value $6.65 4.7%
Average $9.25 45.6%
Median $9.13 43.7%

Finbox.io applies pre-built valuation models to calculate a fair value for a given stock and uses consensus Wall Street estimates for the forecast when available. The company’s average fair value of $9.25 implies 45.6% upside and is calculated from 10 separate analyses as shown in the table above.

First Eagle Investment Management states that for its equity portfolios, it primarily invests in value stocks of small-cap companies. It employs fundamental analysis along with bottom-up stock picking approach to create its portfolios. It’s likely that the investment manager is applying the same valuation techniques as discussed above.


Author: Matt Hogan

Expertise: Valuation, financial statement analysis

Matt Hogan is a co-founder of finbox.io. His expertise is in investment decision making. Prior to finbox.io, Matt worked for an investment banking group providing fairness opinions in connection to stock acquisitions. He spent much of his time building valuation models to help clients determine an asset’s fair value. He believes that these same valuation models should be used by all investors before buying or selling a stock.

His work is frequently published at InvestorPlaceBenzingaValueWalkAAIIBarron’sSeeking Alpha and investing.com.

Matt can be reached at matt@finbox.io.

As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.

Opko Health’s CEO Is Scooping Up Shares Fast. Time To Buy?

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Insider Buying: Opko Health

Phillip Frost, CEO & Chairman, bought 55,000 shares of Opko Health (NasdaqGS: OPK) worth a total of $0.2 million on Friday, February 2nd.

What’s more interesting in fact, Phillip Frost has bought $2.6 million worth of stock over the last two weeks according to Form 4 filings with the SEC. That’s roughly 1.5% of the company’s total market capitalization.

Recent Opko Health Insider Transactions
Insider Trading Relationship Date #Shares Value ($)
Phillip Frost CEO & Chairman Feb 02 55,000 $236,680
Phillip Frost CEO & Chairman Jan 31 65,000 $290,416
Phillip Frost CEO & Chairman Jan 26 55,000 $269,712
Phillip Frost CEO & Chairman Jan 25 75,000 $374,204
Phillip Frost CEO & Chairman Jan 24 100,000 $488,829
Phillip Frost CEO & Chairman Jan 23 100,000 $476,070
Phillip Frost CEO & Chairman Jan 22 100,000 $439,675
TOTAL 550,000 $2,575,586

The company’s shares last traded at $4.38 as of Monday, down 50% over the last year and 14% over the last month. While the stock has been hammered of late, could the recent insider transactions signal a promising road ahead for shareholders?

Opko Health Valuation Detail
Analysis Model Fair Value Upside (Downside)
10-yr DCF Revenue Exit $11.31 158.5%
Peer Revenue Multiples $9.48 116.8%
10-yr DCF EBITDA Exit $4.16 -5.0%
5-yr DCF EBITDA Exit $3.05 -30.2%
10-yr DCF Growth Exit $2.83 -35.3%
Earnings Power Value $2.68 -38.8%
Average $5.58 27.6%

Finbox.io applies pre-built valuation models to calculate a fair value for a given stock and uses consensus Wall Street estimates for the forecast when available. The company’s average fair value of $5.58 implies 27.6% upside and is calculated from 6 separate analyses as shown in the table above.

While insider activity on its own is not necessarily a buy or sell signal, it may offer insight into how ownership and management feel about a company’s future prospects. One of the greatest investors of all time, Peter Lynch, was noted as saying that:

insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.

However, keep in mind this is only one aspect of stock research and that there are other important items to consider. I recommend you continue to research Opko Health to get a more comprehensive view of the company’s fundamentals by looking at:

Efficiency Metrics: what is Opko Health’s EBITDA margin or asset turnover ratio and how does it compare to its peers.

Projected Growth: what is the company’s projected sales growth or long-term earnings growth rate. Is the company’s growth expected to speed up or slow down?

Risk Metrics: what about Opko Health’s financial leverage or its quick ratio. Does the company have enough liquidity to pay its short-term obligations?

 


Author: Matt Hogan

Expertise: Valuation, financial statement analysis

Matt Hogan is a co-founder of finbox.io. His expertise is in investment decision making. Prior to finbox.io, Matt worked for an investment banking group providing fairness opinions in connection to stock acquisitions. He spent much of his time building valuation models to help clients determine an asset’s fair value. He believes that these same valuation models should be used by all investors before buying or selling a stock.

His work is frequently published at InvestorPlaceBenzingaValueWalkAAIIBarron’sSeeking Alpha and investing.com.

Matt can be reached at matt@finbox.io.

As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.

image source: Investopedia

Shake Shack Insiders Are Dumping Shares. Should You?

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Shake Shack executives and insiders have sold $68.1 million worth of stock since November. It’s worth taking a closer look at the company with the stock trading at a rich valuation and Q4’17 earnings around the corner.


Insider Selling: Shake Shack

A number of insiders have been selling shares of Shake Shack (NYSE: SHAK) according to recent form 4 filings with the SEC. Notable insiders include Daniel Meyer (founder), Randall Garutti (CEO) and Jonathan Sokoloff (Director) among others, as shown in the table below. Total insider selling has totaled $68.1 million since November which is approximately 6.2% of Shake Shack’s total market capitalization.

Recent Shake Shack Insider Transactions
Insider Trading Relationship Date #Shares Value ($)
Daniel Meyer Founder Feb 01 100,000 $4,290,145
Select Equity Group 10% Owner Jan 03 52,276 $2,354,197
Daniel Meyer Founder Jan 02 100,000 $4,378,740
Randall Garutti CEO Dec 26 11,000 $491,003
Daniel Meyer Founder Dec 18 100,000 $4,593,090
Select Equity Group 10% Owner Dec 14 85,556 $3,883,122
Select Equity Group 10% Owner Dec 13 10,008 $457,880
Peggy Rubenzer SVP Dec 08 5,000 $231,827
Green Equity Investors Director Nov 30 222,867 $9,066,039
Jonathan Sokoloff Director Nov 30 222,867 $9,066,039
Green Equity Investors Director Nov 29 300,000 $12,014,472
Jonathan Sokoloff Director Nov 29 300,000 $12,014,472
Randall Garutti CEO Nov 24 8,000 $297,890
Peggy Rubenzer SVP Nov 14 5,400 $204,644
Daniel Meyer Founder Nov 10 15,000 $571,268
Daniel Meyer Founder Nov 09 15,000 $556,692
Koff Zach COO Nov 09 5,000 $185,000
Daniel Meyer Founder Nov 06 10,000 $366,604
Select Equity Group 10% Owner Nov 03 50,630 $1,851,425
Daniel Meyer Founder Nov 03 35,000 $1,265,370
TOTAL 1,653,604 $68,139,919

Meyer most recently sold $4.3 million worth of shares on Thursday, February 1st. This is what propelled me to take a closer look at the company’s insider activity.


Potential Reasons For Insider Activity

Shake Shack owns and operates Shake Shack restaurants in the United States and internationally. It offers hamburgers, hot dogs, crispy chicken, crinkle-cut fries, shakes, frozen custard, beer, shakes, wine, and other products. As of December 28, 2016, it had 114 Shacks, including 64 domestic company-operated Shacks, 7 domestic licensed Shacks, and 43 international licensed Shacks.

Analysts covering the stock often compare the company to a peer group that includes Zoe’s Kitchen (NYSE: ZOES), Chipotle (NYSE: CMG), McDonald’s (NYSE: MCD) and Bojangles (NasdaqGS: BOJA). Analyzing Shake Shack’s valuation metrics and ratios relative to its peer group offers insight into why insiders may be selling their shares.

Shake Shack’s EBITDA multiple is calculated by dividing its Enterprise Value by EBITDA and is often used to benchmark the fair market value of a company. Its key benefit over the P/E multiple is that it’s capital structure-neutral, and, therefore, better at comparing companies with different levels of debt.

Shake Shack’s LTM EBITDA multiple of 28.2x is above all of its selected comparable public companies: ZOES (12.8x), CMG (20.5x), MCD (15.0x) and BOJA (8.3x). The company’s forward EBITDA multiple of 26.8x is also above all of its peers: ZOES (13.4x), CMG (17.8x), MCD (15.9x) and BOJA (8.2x).

Shake Shack's EBITDA multiple vs Peerssource: finbox.io

High growth companies typically trade at a premium valuation multiple which could help explain Shake Shack’s high multiple. The company’s revenue growth has ranged from 40.9% to 60.8% over the last four fiscal years – quite impressive.

However, on a quarterly basis Shake Shack’s revenue growth has ranged from 26.9% to 43.5% over the previous six quarters. The company’s top-line growth appears to be trending lower on a quarterly basis as illustrated in the chart below.

SHAK Quarterly Revenue Growth CHart

Could the recent insider activity be a sign that the company’s high growth days are in the rearview mirror?

Shake Shack is expected to report its Q4’17 earnings on February 15th after the market closes. Wall Street is expecting the company to report $93 million in sales which would represent 26.7% growth YoY. With the stock trading at such a high valuation, shares could take a big hit if management reports earnings that miss analyst expectations.


Time To Take Some Chips Off The Table?

The fast-food company’s shares last traded at $41.91 as of Friday, up 33.7% over the last six months. 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 $31.99 implies -23.7% downside and is calculated from 6 valuation models as shown in the table below. Each analysis uses consensus Wall Street estimates for the projections when available.

Shake Shack Valuation Detail
Analysis Model Fair Value Upside (Downside)
10-yr DCF Revenue Exit $27.51 -34.4%
5-yr DCF Revenue Exit $34.21 -18.4%
Peer Revenue Multiples $23.90 -43.0%
10-yr DCF EBITDA Exit $35.96 -14.2%
5-yr DCF EBITDA Exit $43.07 2.8%
Peer EBITDA Multiples $27.30 -34.9%
Average $31.99 -23.7%
Median $30.86 -26.4%

While executives are always happy to tell you all the reasons why their stock is a buy, their actions can tell a different story about the company’s future prospects. A trend of selling activity may indicate that executives think the stock is going down over the upcoming time period, and are trying to sell before the price falls.

Investors long shares of Shake Shack may want to re-evaluate their positions prior to earnings.


Author: Matt Hogan

Expertise: Valuation, financial statement analysis

Matt Hogan is a co-founder of finbox.io. His expertise is in investment decision making. Prior to finbox.io, Matt worked for an investment banking group providing fairness opinions in connection to stock acquisitions. He spent much of his time building valuation models to help clients determine an asset’s fair value. He believes that these same valuation models should be used by all investors before buying or selling a stock.

His work is frequently published at InvestorPlaceBenzingaValueWalkAAIIBarron’sSeeking Alpha and investing.com.

Matt can be reached at matt@finbox.io.


As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.
image source: CNBC

Time To Pick Up Shares of Revolution Lighting?

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Recent insider buying reveals a stock trading at an attractive valuation.

Insider Buying: Revolution Lighting

Two top executives have been buying shares of Revolution Lighting (NasdaqCM: RVLT) according to MarketBeat: Robert Lapenta (Chairman, CEO and President) and James Depalma (CFO). Total insider buying from these two individuals has totaled $3.8 million since mid-January which is approximately 4.6% of Revolution Lighting’s total market capitalization.

Revolution Lighting manufactures and sells lighting solutions focusing on the industrial, commercial, and government markets in the United States, Canada, and internationally. The company was founded in 1991 and is headquartered in Stamford, Connecticut.

The company’s shares last traded at $4.30 as of Thursday, down -45.3% over the last year. While the stock has lost significant value, the recent insider transactions could signal a promising road ahead for shareholders

In addition, finbox.io’s average fair value estimate of $5.18 implies 20.6% upside which is calculated from 2 valuation models as shown in the table below.

Revolution Lighting Valuation Detail

Analysis
Model Fair Value
Upside (Downside)

Peer Revenue Multiples
$5.86
36.2%

Earnings Power Value
$4.51
4.9%

Average
$5.18
20.6%

What’s interesting is that the Earnings Power Value analysis offers nearly 5% upside relative to its current trading price. This model is typically used as a quick way to get a sense of the risk of investing in a company at the current price. It was popularized by Professor Bruce Greenwald in the book Value Investing. The approach is most often used as a “downside case” because it assumes no growth in the subject company’s current earnings.

It appears the market may be undervaluing shares of Revolution Lighting. The company’s top executives certainly believe this is the case.

Note that while insider activity on its own is not necessarily a buy or sell signal, it may offer insight into how ownership and management feel about a company’s future prospects. Keeping an eye on the activities of insiders and institutions can help investors make more informed investment decisions.

As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.

//load.sumome.com/

Author: Matt Hogan

Expertise: Valuation, financial statement analysis

Matt Hogan is a co-founder of finbox.io. His expertise is in investment decision making. Prior to finbox.io, Matt worked for an investment banking group providing fairness opinions in connection to stock acquisitions. He spent much of his time building valuation models to help clients determine an asset’s fair value. He believes that these same valuation models should be used by all investors before buying or selling a stock.

His work is frequently published at InvestorPlace, Benzinga, ValueWalk, AAII, Barron’s, Seeking Alpha and investing.com.

Matt can be reached at matt@finbox.io.

Source: Form 4 Importer
Time To Pick Up Shares of Revolution Lighting?

Rush of Insider Selling: Simpson Manufacturing, Seritage and At Home Group

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Value investors long these three stocks may want to re-evaluate their positions amidst the recent insider activity.

Insider Selling: Simpson Manufacturing Co

Sharon Simpson, Trustee of the Barclay and Sharon Simpson 2007 Trust, sold 120,825 shares of Simpson Manufacturing Co (NYSE: SSD) worth a total of $7.2 million on Tuesday, January 30.

What’s more interesting in fact, Simpson has sold $41.5 million worth of stock since the beginning of December according to MarketBeat. That’s roughly 1.5% of the company’s total market capitalization.

The company’s shares last traded at $58.85 as of Wednesday approximately 95.8% of its 52-week high. While the stock is near its high, could the recent insider transactions signal a troubling road ahead for shareholders?

Simpson Manufacturing Co Valuation Detail

Analysis
Model Fair Value
Upside (Downside)

10-yr DCF Revenue Exit
$40.95
-30.4%

5-yr DCF Revenue Exit
$42.67
-27.5%

Peer Revenue Multiples
$39.74
-32.5%

10-yr DCF EBITDA Exit
$52.07
-11.5%

5-yr DCF EBITDA Exit
$59.64
1.3%

Peer EBITDA Multiples
$49.67
-15.6%

10-yr DCF Growth Exit
$37.08
-37.0%

5-yr DCF Growth Exit
$36.76
-37.5%

Peer P/E Multiples
$58.94
0.2%

Dividend Discount Model
$30.05
-48.9%

Dividend Discount Model (multi-stage)
$32.64
-44.5%

Earnings Power Value
$31.49
-46.5%

Average
$42.64
-27.5%

Median
$40.35
-31.4%

Finbox.io applies pre-built valuation models to calculate a fair value for a given stock and uses consensus Wall Street estimates for the forecast when available. The company’s average fair value of $42.64 implies -27.5% downside and is calculated from 12 separate analyses as shown in the table above.

Insider Selling: Seritage Growth Properties

Bruce Berkowitz is the founder of Fairholme Capital Management and in 2009, he was named the DS fund manager of the decade by Morningstar. Fairholme owned $173.5 million worth of Seritage Growth Properties (NYSE: SRG) stock as of September 30th which was reported by the fund’s 13F filing with the SEC.

This position represented 19.1% of the firm’s stock portfolio. However, Berkowitz has been reducing his position in Seritage Growth Properties since November. Fairholme has sold 1,205,400 shares worth $49 million which has effectively cut his position by 28%.

Seritage Growth Properties is a publicly-traded REIT with 230 wholly-owned properties and 28 joint venture properties totaling over 40 million square feet of space across 49 states and Puerto Rico. The Company was formed to unlock the underlying real estate value of a high-quality retail portfolio it acquired from Sears Holdings in July 2015.

Shares of the company are up 3.3% over the last year offering minuscule returns for investors. The stock last traded at $41.06 as of Wednesday and 7 separate valuation analyses imply that there is 25.6% downside relative to its current trading price.

Seritage Growth Properties Valuation Detail

Analysis
Model Fair Value
Upside (Downside)

10-yr DCF Revenue Exit
$24.34
-40.7%

5-yr DCF Revenue Exit
$24.54
-40.2%

Peer Revenue Multiples
$33.38
-18.7%

10-yr DCF EBITDA Exit
$33.53
-18.3%

5-yr DCF EBITDA Exit
$36.49
-11.1%

Peer EBITDA Multiples
$39.13
-4.7%

Dividend Discount Model (multi-stage)
$22.40
-45.5%

Average
$30.54
-25.6%

Median
$33.38
-18.7%

Although Fairholme has been reducing its position, it is important to note that the hedge fund still owns more than 3 million class A common shares.

Insider Selling: At Home Group

A number of top executives have been selling shares of At Home Group (NYSE: HOME) according to MarketBeat including Lewis Bird III (CEO), Judd Nystrom (CFO), and Peter Corsa (COO). Total insider selling has totaled $12.3 million in the month of January alone representing almost 1% of At Home Group’s market capitalization.

At Home Group operates home decor superstores in the United States. The company’s stores offer items such as accent furniture, frames, pottery, bar stools, garden décor, rugs and mats, bedding and bath products, beds and mattresses. As of November 15, 2017, it operated 150 stores in 34 states. The company was founded in 1979 and is headquartered in Plano, Texas.

Analysts covering the stock often compare the company to a peer group that includes Haverty Furniture (NYSE: HVT), Williams-Sonoma (NYSE: WSM), Pier 1 Imports (NYSE: PIR) and Restoration Hardware (NYSE: RH). Analyzing At Home Group’s valuation metrics and ratios provides further insight into why these insiders may be selling their shares.

A company’s EBITDA multiple is calculated by dividing its Enterprise Value by EBITDA and is often used to benchmark the fair market value of a company. Its key benefit over the P/E multiple is that it’s capital structure-neutral, and, therefore, better at comparing companies with different levels of debt.

At Home Group’s LTM EBITDA multiple of 20.5x is above all of its selected comparable public companies: HVT (5.9x), WSM (7.1x), PIR (3.8x) and RH (17.8x). The company’s Forward EBITDA multiple of 16.2x is also above all of its selected peers.

source: finbox.io

Shares of At Home Group are up 55.5% over the last three months and up 112.1% over the last year. Although investors have enjoyed the recent gains, the stock’s valuation is becoming stretched which is likely the reason for the insider transaction.

While insider activity on its own is not necessarily a buy or sell signal, it may offer insight into how ownership and management feel about a company’s future prospects. Keeping an eye on the activities of insiders and institutions can help investors make more informed investment decisions.

As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.

//load.sumome.com/

Author: Matt Hogan

Expertise: Valuation, financial statement analysis

Matt Hogan is a co-founder of finbox.io. His expertise is in investment decision making. Prior to finbox.io, Matt worked for an investment banking group providing fairness opinions in connection to stock acquisitions. He spent much of his time building valuation models to help clients determine an asset’s fair value. He believes that these same valuation models should be used by all investors before buying or selling a stock.

His work is frequently published at InvestorPlace, Benzinga, ValueWalk, AAII, Barron’s, Seeking Alpha and investing.com.

Matt can be reached at matt@finbox.io.

Source: Form 4 Importer
Rush of Insider Selling: Simpson Manufacturing, Seritage and At Home Group

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