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Evercore Founder Sells Remaining Shares. Should Investors Be Concerned?

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A recent form 4 filing with the SEC revealed that Evercore founder Roger Altman no longer owns shares in the company. With Evercore’s stock up 21.9% in the last six months, it’s worth taking a closer at the insider activity.


Insider Selling: Evercore

A number of top executives have been selling shares of Evercore (NYSE: EVR) according to filings with the SEC including Roger Altman (Founder), Ralph Schlosstein (CEO), Adam Frankel (General Counsel) and Andrew Sibbald (CEO, International). Total insider selling has totaled $47.3 million since November which is approximately 1.1% of Evercore’s total market capitalization.

Recent Evercore Partners Inc Insider Transactions
Insider Trading Relationship Date #Shares Value ($)
Roger Altman Founder and Sr Chairman Feb 05 57,146 $5,487,815
Roger Altman Founder and Sr Chairman Feb 05 35,276 $3,418,324
Ralph Schlosstein President and CEO Feb 02 12,800 $1,280,923
Roger Altman Founder and Sr Chairman Feb 02 41,729 $4,171,223
Roger Altman Founder and Sr Chairman Feb 02 42,836 $4,282,005
Ralph Schlosstein President and CEO Feb 01 25,000 $2,541,273
Roger Altman Founder and Sr Chairman Feb 01 26,125 $2,660,074
Roger Altman Founder and Sr Chairman Feb 01 21,888 $2,227,352
Ralph Schlosstein President and CEO Nov 29 118,144 $10,295,328
Ralph Schlosstein President and CEO Nov 28 100,000 $8,543,570
Ralph Schlosstein President and CEO Nov 27 9,500 $818,637
Adam Frankel General Counsel Nov 24 3,000 $255,483
Adam Frankel General Counsel Nov 21 2,000 $174,764
Adam Frankel General Counsel Nov 16 1,000 $82,600
Andrew Sibbald CEO EVR International Nov 14 12,000 $1,001,159
Adam Frankel General Counsel Nov 14 1,000 $84,437
TOTAL 509,444 $47,324,967

Should Investors Be Concerned?

Evercore operates as an independent investment banking advisory firm worldwide. The company operates through two segments, Investment Banking and Investment Management.

Roger Altman founded Evercore in 1995 after a brief stint in politics advising the Clinton administration. Within two decades Altman was able to transform Evercore from a boutique bank to a powerhouse that’s now valued at over $4 billion.

So with Altman’s ownership stake effectively reduced to zero, should investors be concerned about the firm’s long-term prospects?


Evercore’s Stock Price and Valuation

The company’s shares last traded at $93.85, up 21.9% in the last six months but only up 17.2% over the last year.

Evercore Stock Price Chartsource: finbox.io

Analysts covering the stock often compare the company to a peer group that includes Houlihan Lokey (NYSE: HLI), Stifel Financial (NYSE: SF), Moelis (NYSE: MC) and Raymond James (NYSE: RJF). Analyzing Evercore’s valuation metrics and ratios relative to these comparable companies provides further insight into the stock’s valuation.

Return on Equity (ROE) measures a company’s profitability in relation to the book value of Shareholders’ Equity. ROE is a measure of how effectively management makes investments to generate earnings for shareholders.

The company’s ROE of 28.9% is above all of its selected comparable public companies as shown below.

EVR ROE vs Peers Chartsource: finbox.io

Although Evercore’s returns have outperformed peers, its P/E multiple trades at a discount. The company’s LTM P/E multiple of 20.3x is below HLI (22.0x), SF (21.9x), MC (40.9x) and RJF (20.9x).

EVR P/E Multiple vs Peers Chartsource: finbox.io

Evercore’s valuation actually looks attractive in comparison to peers. Therefore, investors should likely not be too concerned with the recent insider selling. The company’s fundamentals remain strong.

Here are a few more metrics that investors should consider prior to making an investment decision:

Valuation: what is Evercore’s price to book ratio and how does it compare to its peers? Analyze Price / Book here.

Forecast: what is Evercore’s projected earnings growth? Is the company expected to grow faster or slower relative to its peers? Analyze projected earnings growth here.

Efficiency: how much free cash flow does Evercore 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 brian@finbox.io.

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.

Robert Half Insider Sells $11.5 Million Worth Of Stock

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A Robert Half insider sold $4.2 million worth of stock on Monday. This transaction is notable considering the company’s shares are trading at a rich valuation after increasing 25.8% in the last six months.


Insider Selling: Robert Half

Paul Gentzkow, President and COO of Staffing Services, sold 74,753 shares of Robert Half (NYSE: RHI) worth a total of $4.2 million on Monday, February 5th. In fact, Mr. Gentzkow has sold $11.5 million worth of stock when combining the 130,247 shares he sold on Friday.

Recent Robert Half Insider Transactions
Insider Trading Relationship Date #Shares Value ($)
Paul Gentzkow President and COO Feb 05 74,753 $4,209,267
Paul Gentzkow President and COO Feb 02 130,247 $7,334,521
TOTAL 205,000 $11,543,788

Gentzkow has reduced his ownership stake by 32.5% in the last week.

The company’s shares last traded at $56.02 as of Tuesday, approximately 90.9% of its 52-week high. While the stock is near its high, could the recent insider transaction signal a troubling road ahead for shareholders?

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 $48.62 implies -13.2% downside and is calculated from 10 separate analyses as shown in the table above.

Robert Half Valuation Detail
Analysis Model Fair Value Upside (Downside)
10-yr DCF Revenue Exit $46.27 -17.4%
5-yr DCF Revenue Exit $51.29 -8.4%
Peer Revenue Multiples $55.72 -0.5%
10-yr DCF EBITDA Exit $48.11 -14.1%
5-yr DCF EBITDA Exit $54.36 -3.0%
Peer EBITDA Multiples $55.37 -1.2%
10-yr DCF Growth Exit $37.80 -32.5%
5-yr DCF Growth Exit $37.15 -33.7%
Peer P/E Multiples $55.96 -0.1%
Earnings Power Value $44.14 -21.2%
Average $48.62 -13.2%
Median $49.70 -11.3%

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 insider activity 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: how much upside do shares of Robert Half have based on Wall Street’s consensus price target? Take a look at our analyst upside data explorer that compares the company’s upside relative to its peers.

Risk Metrics: What is Robert Half’s financial health? Find out by viewing our financial leverage data metric which measures the dollars in total assets for each dollar of common equity over time.

Efficiency Metrics: Is management becoming more or less efficient over time? Find out by analyzing the company’s asset turnover ratio which measures the dollars in revenue a company generates per dollar of assets.


Author: Andy Pai

Expertise: financial modeling, mergers & acquisitions

Andy is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights:

  • Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores.
  • Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets.

Andy can be reached at andy@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.

The Chairman Of Prestige Brands Is Buying Shares. Should You?

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Two Prestige Brands insiders bought half a million worth of stock on Monday. It’s worth taking a closer look at the company while shares have lost nearly 20% of their value over the last month.


Insider Buying: Prestige Brands

A number of insiders have been buying shares of Prestige Brands (NYSE: PBH) according to recent form 4 filings with the SEC. These notable insiders include Ronald Lombardi (Chairman, President & CEO) and Gary Costley (Lead Director), as shown in the table below.

Recent Intevac Insider Transactions
Insider Trading Relationship Date #Shares Value ($)
Gary Costley Director Feb 05 7,500 $266,025
Ronald Lombardi Chief Executive Officer Feb 05 7,000 $251,580
TOTAL 14,500 $517,605

Lombardi (CEO) filed his Form 4 this morning which is what propelled me to take a closer look at the company’s insider activity.


Potential Reasons For Insider Buying

Prestige Brands manufactures and distributes over-the-counter (OTC) healthcare and household cleaning products worldwide. The company’s OTC healthcare products include Clear Eyes eye care products, Compound W wart removers, Dramamine, and Luden’s throat drops. The company also offers household cleaning products such as the Spic and Span brand. It primarily offers its products to mass merchandisers, drug stores, and supermarkets. Prestige Brands was founded in 1996 and is headquartered in Tarrytown, New York.

Last Thursday Prestige Brands reported its Q3’18 financial results that sent the stock tumbling, although unclear why. Revenue increased 24.8% to $270.6 million and slightly beat Wall Street’s expectations by $0.5 million. The market’s overreaction is likely one reason that Lombardi and Costley picked up shares.

Another reason is the company’s low trading multiples in comparison to comparables Church & Dwight Company (NYSE: CHD), Taro Pharmaceutical (NYSE: TARO), Impax Laboratories (NasdaqGS: IPXL) and Johnson & Johnson (NYSE: JNJ). Analyzing Prestige Brand’s valuation metrics and ratios relative to its peer group offers insight into why insiders may be buying their shares.

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

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

The chart below plots the five year EBITDA compounded annual growth rate for Prestige Brands and its peers.

PBH EBITDA growth chart vs peerssource: finbox.io

The company’s projected 5-year EBITDA CAGR of 11.9% is above all of its selected comparable public companies: CHD (6.4%), TARO (-6.7%) and JNJ (8.8%). Note that IPXL is not meaningful due to negative earnings.

Companies that are expected to grow at a faster rate relative to their peers typically trade at higher valuation multiples. But this is not currently the case for Prestige Brands as illustrated below.

PBH FWD EBITDA Multiples vs Peers Chartsource: finbox.io

The company’s Forward EBITDA multiple of 11.1x trades only above TARO (5.5x) and is below CHD (15.4x), IPXL (13.6x) and JNJ (15.0x).


Prestige Brand’s Stock Price and Valuation

The company’s shares last traded at $38.76 as of Monday, down -35.8% 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 $46.35 implies 19.6% upside 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.

Prestige Brand Valuation Detail
Analysis Model Fair Value Upside (Downside)
10-yr DCF Revenue Exit $57.43 48.2%
5-yr DCF Revenue Exit $51.31 32.4%
Peer Revenue Multiples $39.29 1.4%
Peer EBITDA Multiples $48.92 26.2%
Peer P/E Multiples $48.30 24.6%
Earnings Power Value $32.84 -15.3%
Average $46.35 19.6%
Median $48.61 25.4%

How Should You Interpret this?

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 buying activity may indicate that insiders think the stock is going up over the upcoming time period, and are trying to buy before the price rises.

However, keep in mind that insider activity is only one aspect of stock research and that there are other important items to consider. I recommend you continue to research Prestige Brands to get a more comprehensive view of the company’s fundamentals.


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.

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
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