If readers consider themselves value investors, those who seek companies which they believe are trading below their fair value, they should look at insider transactions. By monitoring when high level corporate employees and executives make purchases investors can fully assume insider sentiment. Executives usually portray their companies as robust with great earnings potential during earnings calls in order to boost investor and analyst confidence. However, when insiders actually use their own funds to purchases shares, we can be sure they are legitimately bullish on the company and believe shares are undervalued and timed for a price appreciation. Below are four companies investors believe are ripe for a price appreciation.
Monster Worldwide (NYSE:MWW) shares are trading at $7. Monster is an advertising agency, comprised of its widely used website that connects employers and job seekers. Shares have traded as high as $19 and as low as $6 within the last 52 weeks. Shares are currently trading below the 50-day average of $7.80 the 200-day average of $8.10.
Monster also seems relatively cheap using the price to sales metric. The company is trading at a ratio of 0.80, in comparison the industry average is 1.00. Moreover, the company is currently trading below its book value of $10 per share. A company insider recently purchased 15,000 shares at the relatively cheap price of just above $7 a share.
Despite Monster’s popularity, the company is relatively small with a market cap of $820 million and an enterprise value of $760 million. The company has $250 million of cash on hand and $190 million of total debt outstanding.
United Bankshares (NASDAQ:UBSI) shares are trading above $29. Shares have ranged between $19 and $30 within the last 52 weeks. Currently shares are trading above the 200-day moving average of $25 and above the 50-day moving average of $28.90. United Bankshares is a regional lender which provides banking services to its commercial and retail banking customers.
The company is currently priced at a premium. Shares are trading at a price to earnings multiple of 18, and a price to sales multiple of 5, in contrast the industry is trading on average at 14 and 1.59, respectively. Despite the premium, an insider has recently purchased almost 2,000 shares.
United Bankshares has a market cap of $1.5 billion and an enterprise value of $1.4 billion. The company has $640 million of cash on hand and $600 million of total debt outstanding. The lender has also performed extremely well within the previous quarters; revenues are up 27% and earnings are up 5% on a year over year basis. Though the company may not be undervalued, investors will get their hands on a healthy dividend of $1.24 a share, which yields 4.2%.
Carmike Cinemas (NASDAQ:CKEC) shares are trading just above $7.50. The company operates cinemas and discount theaters in small to mid-size non-urban markets. Within the last 52 weeks, shares have traded between $5 and $8. Shares are currently trading above the 50-day moving average and 200-day moving average of $7.10 and $6.90.
Insiders recently purchased 1,500 shares. The company is trading at a discount using its price to sales metric. Carmike Cinemas is trading at a ratio of 0.20, in comparison Cinemark Holdings (NYSE:CNK) is trading at a multiple of 1.05 and the industry average is 1.3. Moreover, the company is performing relatively well, revenues are up 8.5% and earnings are up over 400% on a year over year basis.
Carmike has a market cap of $100 million and an enterprise value of $405 million. The company has $19 million of cash on hand and $325 million of total debt outstanding.
Castle Brands (ROX) shares are currently trading and $0.28. Within the last 52 weeks shares have traded between $0.19 and $0.38. Shares are currently trading above the 50-day and 200-day moving average of $0.27 and $0.26, respectively. Castle develops imports and sales alcoholic beverages such as rum, liqueurs, whisky, vodka, wine and tequila. The company markets its own products under various brands.
Using the price to sales metric, the company is relatively cheap. Castle is trading at a multiple of 1, whereas its two largest competitors Brown-Forman (BF-A) and Diageo (DEO) are trading at multiples of 4.1 and 3.6, respectively. Moreover, the company has managed to grow its market share; revenues have increased by 13% each quarter on a year over year basis.
Castle is a small company with a market cap of $30 million and an enterprise value of $36 million. The company has $550 thousand of cash on hand and $6.8 million of total debt outstanding. Nevertheless, the company is liquid, with a current ratio of 1.8.
About the author:
I practice Judaism and my faith is very important to me. I visit family in Israel once a year, but I am educated and work in the United States where I hold an MBA and a bachelor’s in English. I am a patient man, enjoy wine but am not a connoisseur, and I listen more than I speak.