Market Direction and Stock Trends

[DiscoverGold]

Insider Weekends: First Insider Purchase By The CEO Of eHealth In Four Years
By: InsideArbitrage | August 9, 2020

Welcome to edition 528 of Insider Weekends. Insider buying increased last week with insiders purchasing $172.17 million of stock compared to $88.83 million in the week prior. Selling also increased significantly with insiders selling $5.71 billion of stock last week compared to $1 billion in the week prior. With many companies already reporting earnings, we are likely to see a slew of insider purchases in the coming weeks.

Sell/Buy Ratio: The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by total insider purchases that week. The adjusted ratio for last week went up to 33.14. In other words, insiders sold more than 33 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 11.28.



Note: As mentioned in the first post in this series, certain industries have their preferred metrics such as same store sales for retailers, funds from operations (FFO) for REITs and revenue per available room (RevPAR) for hotels that provide a better basis for comparison than simple valuation metrics. However metrics like Price/Earnings, Price/Sales and Enterprise Value/EBITDA included below should provide a good starting point for analyzing the majority of stocks.

Notable Insider Buys:

1. eHealth, Inc. (EHTH): $79.46

Chief Executive Officer Scott N. Flanders acquired 50,000 shares of this private health insurance exchange, paying $71.54 per share for a total amount of $3.58 million. Mr. Flanders increased his stake by 7.66% to 703,024 shares with this purchase.

Mr. Flanders took on the role of CEO at eHealth on May 31, 2016 after serving on the company’s board since 2008. He came to eHealth by way of Playboy Enterprises and Macmillan Publishers. One of the things that stood out about Mr. Flanders’ leadership positions at various companies was that these companies experienced a big increase in revenue over multiple years and were often acquired or taken private. This pattern of revenue increases can be seen at eHealth as well with revenue increasing 32% in 2018, 101% in 2019 and 45% in the first half of 2020.

The last time Mr. Flanders bought shares of eHealth on the open market was on August 4, 2016 when he purchased 117,000 shares for an average price of just $9.15. The stock hit a high of $148 earlier this year before giving back some gains during the pandemic and then dropping steeply about two weeks ago after second quarter 2020 results were announced.

One concern I have from my initial look at the company is that despite the big increases in revenue and adjusted EBITDA, free cash flow remains negative. While the company increased its revenue guidance for the full year 2020 when it reported Q2 2020 results, it also expects a larger operating loss and higher CapEx. The company expects to become free cash flow positive in 2022 and expects steady increases after that as you can see from the chart below.



* * *

Read Full Story »»»

DiscoverGold