Sentiment as measured by the number of companies reporting insider buying improved last week but still remains lackluster. According to our records, insider at 123 publicly traded companies opened their checkbooks and purchased company stock.
We are particularly fond of when executives and directors buy stock following a beat-down. It's even better if more than one insider sees "value" and a group make the same decision at the same time. It's called cluster buying/selling. It also sets off the Spidey-Sense when the buy run in the opposite direction of the insiders' normal trading habits.
Quiksilver, Inc. (NYSE:ZQK) shares got smoked after the company reported disappointing earnings and weaker forward guidance than Wall Street expected. On June 2, 2014, the stock closed at $5.79, reported earnings and closed the next day at $3.41. A loss of 41% fits the smoked description, no?
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Quiksilver designs, develops, markets, and distributes branded apparel, footwear, accessories, and related products primarily for men, women, and children. The company provides its products for various activities, including casual and outdoor lifestyle associated with surfing, skateboarding, snowboarding, BMX and motocross, beach and board riding sports, rally car, and other activities. Quiksilver, Inc. offers its products primarily under the Quiksilver, DC, and Roxy brands.
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Apparently, ZQK didn't sell enough and doesn't expect to sell of enough of that stuff to keep Wall Street happy, but three insiders jumped on the stock following its beating. Director, Joseph Berardino bought 10,000 shares at $3.65 for a total of $35,600. CEO, Andrew Mooney and CFO, Richard Shields each acquired 100,000 shares at $3.40 and $3.38, respectively.
It's interesting to note that none of the men ever bought the stock before, unless it was acquired for no cost, typically by exercising stock options. ZQK has recovered some lost ground since the trio unleashed their debit cards; perhaps seeing and setting the bottom?
If not the low, at least somewhat close to the 52-week low of $3.13. While relative to the 52 week range Quiksilver is relatively inexpensive, the company is trading pretty close to its five-year, average price-to-sales (PS) ratio.
As of June 11, 2014's close, investors are pay 0.41 time ZQK's revenue; whereas, the half-decade norm is 0.39. For 2015, analysts forecast sales of $1.73 billion for apparel maker. If the stock trades at the average P/S ratio since 2009, then the stock would price out at $3.96, which is five cents less than Wednesday's close.
Overall: The trio of insiders might have picked the low but, in our opinion, Quiksilver, Inc. (NYSE:ZQK) probably needs to kick-start sales growth to expand its historical P/S ratio to offer more upside for investors.
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